Asset Management Company (AMC) in Mutual Funds

What is an Asset Management Company?

An Asset Management Company (AMC) in mutual funds is a financial institution responsible for managing pooled investments from individual and institutional investors. These are buy-side firms that acquire investments on behalf of their clients, making informed decisions about which securities to purchase to maximise returns while managing risk.

Professional fund managers help achieve the fund’s objective by analysing market trends, assessing financial instruments, and building diversified portfolios that align with the investment strategy. The mutual funds managed by AMCs can be broadly classified into two categories:

• Active Funds: In Active Funds, fund managers are directly involved in selecting securities to generate returns higher than the market benchmark. These funds often allocate substantial resources to research and analysis, resulting in higher expense ratios.
• Passive Funds: Passive Funds are designed to replicate the performance of an underlying index. Examples include Index Funds and Exchange-Traded Funds (ETFs). These funds have lower expense ratios as they do not require active management.

Some AMCs offer active and passive schemes, catering to diverse investor preferences.

Example of an Asset Management Company (AMC)

The mutual fund sector in India is driven by several trusted AMCs that effectively handle a broad range of investment options, including debt, equity, hybrid, and passive funds. Here are some examples of an AMC, based on financial metrics like Market Capitalisation and Price-to-Earnings (P/E):

Note: The data shown is approximate as of October 7, 2025, based on publicly available market information. Always verify the latest figures from each AMC’s official investor disclosures before making investment decisions.

Role of AMCs in Mutual Fund Management

The main advantage of AMCs lies in their professional expertise. Experienced fund managers analyse market trends, make informed investment decisions, and strive to generate returns while managing risk. Operating under a strict regulatory framework defined by SEBI, AMCs ensure transparency, fairness, and accountability throughout the investment process.

Some of the key functions performed by AMCs include:

• Fund Creation: Designing and launching mutual fund schemes that cater to varied investment goals and risk profiles.
• Investment Management: Employing skilled fund managers to decide where and how to invest on behalf of investors.
• Administrative Services: Managing daily operations such as record-keeping, customer service, accounting, and regulatory compliance.
• Performance Tracking and Reporting: Monitoring fund performance and providing timely updates and reports to investors.

Organisational Structure of an AMC

An Asset Management Company (AMC) operates within a structured framework that ensures transparency, efficiency, and compliance with SEBI Mutual Fund Regulations. This framework for AMCs defines the roles and responsibilities of each stakeholder in managing investor funds.

1. Sponsor

   The sponsor is responsible for setting up the mutual fund and establishing the AMC to manage it. Sponsors must have a strong business reputation and a sound financial record. A sponsor must generally contribute at least 40% of the AMC’s net worth (subject to SEBI approval) and demonstrate a sound financial and profitability record per SEBI’s eligibility norms. They create the trust, appoint the trustees, and provide the initial capital required to begin mutual fund operations.

2. Trustees

   Trustees hold the assets of the mutual fund in trust for the benefit of investors. They ensure that the AMC acts in the best interest of unit holders and complies with SEBI Mutual Fund Regulations, 1996. Trustees hold fund assets for unit holders and oversee that the AMC operates in investors’ interests, including ensuring reasonable fees, addressing conflicts of interest, and monitoring compliance with SEBI’s defined core responsibilities. At least two-thirds of the trustees must be independent and not associated with the sponsor. This ensures proper checks and balances on AMC operations.

3. Board of Directors and Management

   The AMC’s Board of Directors provides strategic direction and ensures good governance. The Chief Executive Officer (CEO) manages day-to-day operations, aligning business activities with the company’s objectives. Under the leadership of the CEO, fund managers and analysts conduct market research, identify investment opportunities, and manage portfolios to achieve the fund’s goals.

4. Custodian

   The custodian is a SEBI-registered entity responsible for holding and safeguarding the securities owned by the mutual fund. Custodians ensure the assets' physical and electronic security and verify all transactions carried out by the AMC.

5. Registrar and Transfer Agent (RTA)

   AMCs appoint Registrars and Transfer Agents to handle administrative functions. They process investment and redemption requests, maintain investor records, and assist with fund-related transactions. Their role helps ensure smooth investor servicing and accurate record-keeping.

6. Support and Compliance Functions

   Dedicated departments within the AMC manage regulatory compliance, risk management, investor relations, and reporting. These units ensure that the AMC follows all applicable laws and provides transparent information to investors and regulators.

How Does an AMC Work?

An AMC’s core aim is to maximise returns while maintaining risk control. Here’s a detailed overview of how an AMC functions:

1. Investment Research and Fund Collection

   AMCs conduct detailed research to identify potential investment opportunities. They analyse market trends, economic indicators, and company performance before allocating investor funds. To build a diversified portfolio, the pooled money from individuals, institutions, and high-net-worth clients is invested across asset classes such as equities, bonds, and real estate.

2. Portfolio Management

   Professional fund managers design and maintain portfolios aligned with each scheme’s objectives. They make data-driven decisions on buying, holding, or selling assets, ensuring proper asset allocation and periodic rebalancing to manage risk and optimise returns.

3. Administrative and Support Operations

   AMCs maintain accurate fund accounts, update the Net Asset Value (NAV) regularly, and provide periodic performance reports. NAVs are calculated and disclosed daily, with timelines and disclosures guided by SEBI’s master circular framework. They also manage investor servicing, process transactions, and ensure operational efficiency to maintain transparency and trust.

4. Compliance, Governance, and Transparency

   Every AMC operates within the SEBI Mutual Fund Regulations, 1996 framework. They are required to disclose key information such as portfolio composition, performance, and expense ratios. This ensures ethical operations and helps investors make informed decisions.

5. Processing Redemptions and Payouts

   Redemption timelines vary by fund type.

   • Liquid / Overnight Funds: payouts are typically processed within T+1 working day
   • Debt and Gilt Funds: settlements are generally completed within T+2 working days.
   • Equity and Hybrid Funds: redemption proceeds are usually credited within T+3 working days (though many AMCs now process them faster, within T+2).
   • Global Funds: redemptions may take T+5 working days or longer, depending on international market operations.

   Note: As per SEBI Circular and AMFI guidelines, redemption or repurchase proceeds must be transferred to unitholders within three working days (T + 3) for domestic schemes and five working days (T + 5) for overseas schemes. Any delay beyond these limits requires the AMC to pay interest at 15% p.a. on the delayed amount until the payout is made.

6. Revenue Generation

   AMCs earn revenue primarily through the expense ratio, which is charged as a percentage of the fund’s NAV. This fee covers fund management, administrative expenses, and distribution costs. SEBI regulates these charges under the Total Expense Ratio (TER) framework, ensuring transparency and fairness.

   The TER varies based on the type and size of the mutual fund. Generally, larger funds with higher Assets Under Management (AUM) have lower fees, while smaller funds bear slightly higher costs.

   SEBI prescribes slab-wise TER limits that vary by AUM size and scheme type. For example, as per SEBI’s current guidelines, equity schemes with AUM up to ₹500 crore may charge a maximum TER of 2.25%, with progressively lower slabs for higher AUM tiers. For passive funds and ETFs, the TER is capped at 1.00%. SEBI reviews these limits periodically to ensure transparency and fairness.

   AMCs must also comply with SEBI’s investment exposure limits, diversification norms, and disclosure requirements to manage risk and ensure investor protection.

Types of AMCs in India

Different types of asset managers operate in India under different regulators. SEBI regulates mutual fund AMCs, while other asset managers, such as insurance, pension, or alternative investment managers, fall under separate laws (IRDAI, PFRDA, or SEBI-AIF Regulations).

The following categories describe broader asset management entities rather than only mutual fund AMCs:

• Mutual Fund Companies: These are regulated by the Securities and Exchange Board of India (SEBI) and manage funds collected from retail and institutional investors. Depending on the fund's objective, they design schemes that invest in equities, debt, or hybrid assets.
• Hedge Funds: Hedge funds use pooled capital to invest in complex financial instruments to generate high returns. Due to their higher risk exposure, they often use leverage and are suitable only for experienced or high-net-worth investors.
• Real Estate Asset Managers: These AMCs invest in real estate properties such as residential, commercial, or industrial buildings. Their main objective is to earn rental income and increase property value over time.
• Private Equity Firms: Private equity AMCs invest in privately held businesses, often taking significant ownership stakes. Returns are realised through company buyouts, mergers, or public listings.
• Exchange-Traded Funds (ETFs): Most ETFs in India are launched and managed by mutual fund AMCs under SEBI regulation. These track-specific indices or sectors provide low-cost, passive diversification.
• Pension Fund Managers: These fund managers are regulated by the Pension Fund Regulatory and Development Authority (PFRDA) under the National Pension System (NPS). Their objective is to generate long-term returns and ensure retirement security for subscribers.
• Insurance Asset Managers: Regulated by the Insurance Regulatory and Development Authority of India (IRDAI), these managers invest premium collections from policyholders into low-risk or balanced instruments. They aim to grow funds while maintaining sufficient liquidity for future claim settlements.
• Wealth Management Firms: Wealth management AMCs primarily serve high-net-worth individuals, offering personalised investment strategies across equities, bonds, real estate, and alternative assets to preserve and grow wealth.

Pros and Cons of AMCs

Asset Management Companies (AMCs) offer professional fund management and diversification benefits, but also involve certain limitations. The table below outlines their main advantages and drawbacks:

Regulatory Guidelines that Govern the Working of AMC

Mutual fund AMCs are primarily regulated by SEBI. AMFI is an industry body that issues codes and guidance, but is not a statutory regulator. RBI is relevant only when a bank sponsors an AMC, while SEBI remains the main regulator for mutual funds.

• SEBI: It oversees the capital markets and sets the rules that all mutual fund companies must follow. It handles AMC registration, checks rule-following, shares fund details, and helps solve investor complaints.
• AMFI (Association of Mutual Funds in India): It’s a body formed by mutual fund companies to guide fair investing, offer support, and ensure rules are followed. AMCs and mutual funds are members of the Association of Mutual Funds in India (AMFI) and must follow its Code of Conduct and operational guidelines, while SEBI remains the statutory regulator.
• RBI (Reserve Bank of India): SEBI chiefly regulates AMCs, but if a bank sponsors an AMC, the RBI also keeps an eye on it. RBI ensures these AMCs follow financial rules and help keep the system stable.

As per the RBI, SEBI & AMFI regulations, AMCs should comply with the following:

• The Chairman of an AMC cannot simultaneously serve as a Trustee of any mutual fund, in line with SEBI’s conflict-of-interest provisions. A sponsor, or any person holding 40% or more of an AMC’s net worth, must meet SEBI’s sponsor-eligibility criteria. At least two-thirds of trustees must be independent, and no trustee may hold a position in the AMC.
• Key personnel should have a clean record (without a history of fraud or financial misconduct).
• An AMC cannot serve as the Trustee for the same mutual fund it manages.
• Under SEBI’s current framework, a full-scope AMC must maintain a minimum net worth of ₹50 crore. For passive-only entities under the Mutual Fund Lite (MF Lite) framework, SEBI prescribes a minimum net worth of ₹35 crore, relaxable to ₹25 crore for AMCs with at least five years of consistent profitability.
• AMCs’ offer documents must disclose their own investments in fund schemes.
• At the end of each quarter, AMCs must submit compliance reports to the fund’s trustees.
• AMCs must work under trustees to stay transparent and keep investors safe.

The discussed regulations ensure AMCs operate reliably and keep investors informed.

Things to Consider Before Choosing an AMC

Selecting the right Asset Management Company (AMC) is vital for meeting your investment goals. Consider the following factors before making your choice:

• Performance Record of the Fund: Check the past track record of the AMC and analyse the returns offered across market cycles. This approach helps you check how steady the fund is, how it performs with risk in mind, and how it compares to others.
• Fund Manager’s Expertise: Review the experience, qualifications, and decision-making style to determine the fund manager's performance.
• Regulatory Compliance: Your chosen AMC must be SEBI-registered and follow SEBI’s mutual fund regulations and AMFI’s industry code. RBI involvement applies only if a bank is the sponsor.
• Fund Options Supported: Choose an AMC that supports several schemes (example: equity, debt, etc.) to suit various investment tenures and risk profiles.
• Investor Services: Review how well the AMC handles customer service, online tools, SIPs, and fund withdrawals to ensure a stress-free investment journey.
• Fee structure: To get an exact idea of the AMC fee structure, you must know the meaning of the TER. Smaller funds generally have higher TERs (up to 2.25% for equity schemes) while larger funds benefit from lower slabs under SEBI’s tiered TER structure.
• Credibility and Reputation: To invest confidently, pick a reputable AMC with clear information and good investor reviews.

Key Takeaways

AMCs play a prominent role in shaping the country’s mutual fund landscape. It is essential to choose a reputable AMC to ensure transparency, professional fund management, and align investment with your financial objectives. They follow SEBI & AMFI regulations to ensure investor protection. Whether you're just starting or possess years of investing experience, learning how AMCs function helps you make informed choices and build wealth over time. Before choosing an AMC, consult official sources to make a wise decision.