An Asset Management Company is often referred to as AMC, is an entity that manages different sorts of funds of retail clients and invests them in several areas to maximise the returns on them. The funds could be invested in stocks, mutual funds, bonds, and properties. Lately, Asset Management Companies (AMCs) are commonly called asset or money managers. Such companies help investors in the diversification of their investments in several areas.
An AMC has asset managers working to evaluate the framework of the investment that needs to be diversified. After evaluation, they conduct market research about the possible investment option to understand its viability as a possible investment destination. Supported by the results of this research, they plow ahead with the investment strategy.
There are three stages involved in the standard service procedure of Asset Management Companies.
In this stage, the investment managers consider the shape of assets and research what amount will be suitable for allocation. The subsequent factors that need to be considered while Asset Allocation are:
In this stage, the manager formulates a portfolio for investments which is crucial for the correct management of assets. Asset managers research the market to consider possible downfalls and trends for creating an appropriate portfolio. The possible risk factors consistent with the marketing research are also considered. One of the primary areas of focus is where the investment should be made. For example, whether in high-rated securities or the other way around.
The last stage of an asset management procedure is the constant evaluation of the portfolio. The portfolio is evaluated on parameters like the speed of returns on the investment. The asset manager creates a performance monitoring report of the portfolios based on various parameters to optimize the investment. The asset managers share these reports with their clients periodically to keep them aware of the performance of their investments.
This ratio is obtained by dividing the company’s market capitalization with its annual revenue.
It gives information on how cheap or expensive the rates of the stock are and guides an investor on how much he should invest.
A company’s PEG ratio is obtained by dividing the P/E ratio with the expected earnings growth rate. It helps to level the field by considering projected growth.
The company’s payout ratio is calculated by dividing the company’s annual dividend rate with the company’s earnings.
The debt-to-equity ratio of a company is obtained by dividing the company’s total liabilities with its shareholder’s equity. It is used to compare the reliance of companies on debt to fund their operations.
The beta score gives the measurement of how reactive a stock is to the market’s ups and downs. The beta score of ONE indicates a stock is less reactive to market swings, while a beta of score over ONE indicates a volatile stock.
The free cash flow is calculated from the cash flow statement of the company by subtracting it from capital expenditures. The free cash flow tells that information on money generated by the company.
The ROE is obtained by dividing the company’s net earnings with its shareholder’s equity. It suggests the efficiency of a company in using its shareholder’s equity to generate profit.
The price-to-book calculated by dividing the company’s stock price with net assets.
SEBI is responsible to regulate all Asset Management Companies (AMCs) in the country. When it comes to managing, supervision, and evaluating how the investment managers are working, SEBI is the main authority. SEBI also has a system for complaints and other grievances redressal related to asset managers. Further, the Association of Mutual Funds of India (AMFI) regulates AMCs passively.
For a Pvt. Ltd.:
An Asset Management Company often referred as AMC, is an entity that manages different sorts of funds of retail clients and invests them in several areas to reinforce the returns on them. The funds could be invested in stocks, mutual funds, bonds, and properties.
Asset management consists of managing the portfolio of investments while investment management is focused on maximising the returns on investment.
Asset managers evaluate the framework of the investment that needs to be diversified. After evaluation, they conduct market research about the possible investment option to understand its viability as a possible investment destination. Supported by the results of this research, they plow ahead with the investment strategy.
Yes, a Non-Resident Indian (NRI) can invest in an Asset Management Company (AMC).
The Securities Exchange Board of India (SEBI) is the main regulatory body in India for Asset Management Company.