Asset management companies (AMC) are companies that manage the mutual fund (trust). AMC manages investment of the funds of the customers into securities which match the actual financial objective of the mutual fund.
Sponsors create AMC and trustees appoint AMC as investment managers of the trust as per recommendation of the sponsors.
The trustees and the AMC sign the investment management agreement that contains the duties, rights and functions of AMC.
AMC are, therefore, fund portfolio manager and can have several mutual fund schemes. The investment objective of the mutual funds may be of same kind or vary from one another.
An AMC generally hires professional fund managers to look after the funds. The professional fund managers buy and sell securities complying to the fund's objective.
Examples of AMC
Few examples of AMC are as follows:
* HDFC Mutual Fund is the name of the trust and the mutual fund is managed by HDFC Asset Management Company Limited.
* ICICI Asset Management Company, is a joint venture of ICICI Bank and Prudential Plc, forming the trust, ICICI Prudential Mutual Fund.
* Birla Sun Life Asset Management, the formed jointly by Aditya Birla Group and Sun Life Financial.
* Tata Asset Management Company formed by Tata Mutual Fund.
Restrictions of SEBI on AMC
Companies have to be registered under the Company's Act, 1956. AMC is subject to the regulations of Securities and Exchange Board of India (SEBI).
It is important for an AMC to focus on its core business as it manages the fund of investors. In order to ensure that the activities of AMC comply with the interest of the investors, the regulatory body, SEBI imposed certain restrictions on the business activities of AMC.
The restrictions include:
1. An AMC is not liable to undertake any business activity in the nature of portfolio management services, management and advisory services to offshore funds etc, provided these activities abide by with the activities of mutual fund.
2. An AMC cannot invest in any of its own schemes unless full disclosure of its intention to invest has been made int eh offer document.
3. An AMC shall not act as a trustee of any mutual fund.