The primary role of an Asset Management Company (AMC) is to manage assets of its clients, ranging from corporations to individuals, with an objective to achieve maximum returns. An AMC creates a pool of funds from its clients and then invests that pool into various types of securities, in accordance with the defined objectives and investing guidelines. Thus, the main role of an AMC becomes fund management. For the purposes of managing and administering funds, AMCs hire fund managers. These fund managers are responsible for maintaining the investment portfolio and making investment decisions to achieve the fund’s objectives. AMCs research, monitor and analyze the performance of stocks, bonds and other securities. Based on this research and the prevailing economic conditions, buying and selling decisions are made by fund managers. These research reports and other performance data are also provided to the clients.
Responsibilities of AMCs
Asset management companies also play the role of portfolio managers for high net worth individuals who usually don’t have time to actively trade and manage their portfolios. Portfolio management services include trading securities, executing orders on behalf of clients and maintaining their investment portfolios, based on agreed investment strategies. These portfolio managers apply various risk management and diversification techniques, and invest in various types of securities to maintain the portfolios according to the financial needs and goals of their clients. This service is also called Discretionary Asset Management and is usually offered as a part of the wealth management services of AMCs.
Wealth management services are provided by AMCs to individuals with very high personal net worth or institutional investors. It is sometimes referred to as Private Banking. It involves offering personalized financial services to those who have comparatively more wealth to manage than an average investor. The services may include management of assets and liabilities, cash and deposits management, liquidity management, custom lending and financing.
The large amount of wealth of these individuals provides access to alternative investment options, such as a private equity fund, hedge fund or Real Estate Investment Trusts (REITs). The role of the AMC in such cases involves offering personalized and custom advisory solutions for investing in specific investment vehicles, ensuring compliance with regulations, tax minimization and, above all, realization of financial goals. These investment options and services are generally not available to normal investors and are also not viable for them because they entail very high fees, demand significant investment, and lack liquidity and regulatory controls.