Source- This post on Asset Management Companies (AMCs) has been created based on the article “AMC heads to be pulled up for abusive market practices: SEBIIn dark shadow of a powerhouse: tribes who built A.P power project live in darkness” published in “The Hindu” on 7 August 2024.
Why in News?
Recently, SEBI announced in a circular that it will hold Chief Executive Officers (CEOs), Managing Directors (MDs), or any equivalent officials of asset management companies (AMCs) responsible and accountable for implementing mechanisms to deter potential market abuse.
About Asset Management Companies (AMCs)
| Aspects | Description |
| About | 1. An asset management company (AMC) is a firm that invests money collected from clients into various investments such as stocks, bonds, real estate, and more. 2. AMCs create pooled investment structures like mutual funds, index funds, or exchange-traded funds (ETFs) which they manage as a single portfolio. 3. AMCs are often called money managers or money management firms. 4. If they offer mutual funds or ETFs to the public, they are also known as investment companies or mutual fund companies. |
| Regulated by | SEBI is the Indian Capital Market Regulator that governs and controls every AMC in India. |
| How size of AMCs are calculated | The performance and size of AMCs are typically measured by their assets under management (AUM), which is the total value of the assets they manage. |
Role and Function of an AMC
1. Investment Management: AMCs manage and optimize portfolios to meet specific investment goals. They perform thorough market analysis and use their expertise to make informed investment decisions on behalf of their clients.
2. Diversification: By pooling funds from multiple investors, AMCs can diversify investments across a wide range of assets. This reduces risk as the performance is not reliant on a single investment.
3. Access to a Wide Range of Investments: AMCs provide individual investors access to a variety of investment options, including those that may require large capital and would otherwise be inaccessible.
4. Administration and Record-Keeping: AMCs handle all administrative tasks such as record-keeping, reporting, and regulatory compliance, which simplifies the investment process for their clients.
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