What Is AMC In Mutual Funds?

Have you searched for “AMC meaning in mutual fund” or “AMC full form in mutual fund” to learn about the role of AMCs in mutual fund investments? Don’t worry—we’ll provide a brief primer on it. Asset Management Companies (AMC) play a vital role in the structure of mutual funds. It is helpful for investors to understand the function of AMC and the role of AMC in mutual funds.

Read on to learn more about AMCs. 

What is AMC? 
Let us now dwell more on “AMC meaning in mutual fund” and more specific questions like “What is AMC in mutual fund?” AMC is a company that manages the day to day operations of the mutual fund. The sponsor or the trustees usually appoint the AMC with SEBI approval. 

Listed below are key highlights as per SEBI regulations:
    1. The AMC should be a fit and proper person. 

    2. It is responsible for conducting the activities of the mutual fund. It, therefore, arranges for the requisite offices and infrastructure, engages employees, provides for the requisite software, handles advertising and sales promotion, and interacts with regulators and various service providers. 

    3. The directors of the asset management company need to be persons having adequate professional experience in the finance and financial services related field and not found guilty of moral turpitude or convicted of any economic offence or violation of any securities laws. Prior approval of the trustees is required before a person is appointed as a director on the board of the AMC. At least 50 percent of the directors should be independent directors i.e., not associate of or associated with the sponsor or any of its subsidiaries or the trustees. The Chairman of the asset management company is not a trustee of any mutual fund.

    4. The AMC needs to have a minimum net worth of Rs. 50 crores maintained on a continuous basis. 

    5. A change in the control of the AMC directly or indirectly can be made only with the prior approval of the trustees and SEBI. A written communication about the proposed change in the control of the AMC is sent to each unitholder (for those unitholders whose e-mail IDs are registered with the mutual funds, the communication can be sent through e-mail) and an advertisement is given in one English daily newspaper having nationwide circulation and, in a newspaper, published in the language of the region where the Head Office of the mutual fund is situated. The unitholders are given the option to exit on the prevailing Net Asset Value (NAV) without any exit load within a time period not less than 30 calendar days from the date of communication. 

    6. The AMC has to take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any scheme is not contrary to the provisions of the SEBI regulations and the trust deed. Further, it has to exercise due diligence and care in all its investment decisions. 

    7. The appointment of an AMC can be terminated by a majority of the trustees, or by 75 percent of the Unit-holders of the scheme. However, any change in the AMC is subject to prior approval of SEBI and the Unit-holders.

To sum up, AMCs are important because they are the investor-facing entity of the mutual fund organisation. Mutual fund investors’ successful investments greatly depend on them. By understanding AMCs’ functioning and responsibilities, investors can make better investment decisions and secure their rights.

How to Evaluate AMCs

Evaluating AMCs is often a key aspect of investment consideration and decision making. Here are some key aspects to consider during the process. 

Performance track record 
More consistent the fund performance of an AMC in any fund category over different time periods such as 1 year, 3 year, 5 year, 10 year and since inception, greater may be the investor’s conviction while investing. For overnight fund, liquid fund, ultrashort duration fund, low duration fund, and money market fund, take a look at returns over 7 days, 15 days, 1 month, 3 months and 6 months.

Fund manager reputation 
Consistently superior performance vis-a-vis scheme benchmark and peer funds may make investors favourably consider an AMC.

Expenses 
Lower managing expenses of an AMC as indicated by its schemes’ expense ratio may be better for investors.

Reputation 
Consistent fund performance along with investor friendly services contribute greatly to the reputation of any AMC. Often, well-established AMCs benefit from enhanced reputation. 

FAQs

1. What is the difference between a mutual fund and an AMC?
AMC manages the day to day operations of the mutual fund for the investors and is an important component of the mutual fund. Besides AMC, mutual fund has two other major constituents of its organisation consisting of sponsors, effectively the promoters who set up the AMC, and trustees who are part of the trust and provide internal but independent oversight of the AMC. These three significant components work with other parts of the organisation like Registrar and Transfer Agents (RTAs) and custodians and depositories.

2. How can investors resolve their complaints with an AMC? 
Specific employees in every AMC are earmarked for this purpose. Mutual fund list the customer care number, email address and SMS channels to help investors. Investors can also visit the branch/UFC during working hours. Finally, investors can escalate the matter by taking it to the mutual fund regulator, SEBI, through its online platform SCORES.

Disclaimer: 
For more details, please refer to SEBI Mutual fund regulations and circulars issued thereunder. 

The above information is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. Users of this document should seek advice regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to on this document and should understand that statements regarding future prospects may not be realized. The recipient of this material is solely responsible for any action taken based on this material. Opinions, projections and estimates are subject to change without notice. UTI AMC Ltd is not an investment adviser, and is not purporting to provide you with investment, legal or tax advice. UTI AMC Ltd or UTI Mutual Fund (acting through UTI Trustee Company Pvt. Ltd) accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this information, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.