Asset management company
An asset management company or AMC is a company which professionally invests money, either pooled from many investors, of a family or of an individual, in different asset classes. It makes the investment process more systematic.
Motilal Oswal, HDFC Securities etc are some AMCs in India.
An AMC’s clients could include high-net worth individuals, hedge funds, pension funds, and retail investors (for products like MFs, index funds, ETFs). In case of MFs and ETFs, we also call the AMC as the fund house.
AMC helps in Asset class diversification. Investment through an AMC helps to save time, get expert advice, decrease risk and increase returns. AMC hires talent which analyses the consistency and amount of returns from various assets and the future performance of assets. For ex:- Analysis of the performance of a stock through technical and fundamental analysis
Asset Management Companies Vs Brokerage Houses
No matter how much money a client has to invest, brokerage houses accept nearly all of them, and they are required by law to offer suitable services. Suitable means that they are not liable if their clients incur losses so long as they use their best judgment to handle the assets prudently and in accordance with their clients’ stated goals.
In contrast, The majority of asset management companies are fiduciary companies. Fiduciaries essentially have to serve in their clients’ best interests at all times, abstaining from conflicts of interest. If they don’t, they can face criminal liability.