Introduction to Asset management company
Asset Management Companies or AMCs are institutions that collect the financial assets of persons, interested entities and clients and direct these assets towards where they are required. They invest in stocks, bonds, real estate, private equity, etc., and often provide high returns to the investors an AMC pooled these resources from. AMCs also manage hedge funds and mutual funds by virtue of a centralized portfolio to better serve small investors.
Understanding Asset Management Company
Asset Management Companies range from being personal money managers, or handle the private accounts of high-net-worth individuals, or sponsor mutual funds operation companies. Due to this vastness and reach towards funds, AMCs often offer plenty of diversification in terms of risk and returns and portfolios of asset classes to investors. This gives the AMC the benefit of economies of scale.
AMCs usually are the buy-side firms. This means that they purchase securities, and often at bulk which brings the benefit of discounts. Investing via AMCs for investors is exciting because there is no minimum investment amount necessary, like there is when purchasing stocks. They purchase these securities and investment instruments from sell-side firms like investment banks and stock brokers.
Highlights of Asset Management Company
AMCs and Brokerage Houses are similar in many ways. They both collect funds and instruments of investments and provide to both the parties.
However, AMCs can make the decision on trade without consulting the client first, whereas Brokerage Houses do not have such a luxury.
Alternatively, AMCs must meet client requirements and goals, whereas Brokerage Houses are responsible only for the trade, and are not responsible if the clients lose their funds.
Where brokerages charge commissions, AMCs charge fees, or resort usually to charge fees in calculating a percentage of the client's total assets under management (AUM) meant as the AMCs’ fee.
Asset management and Wealth management sound similar. But asset management is where the conditions of the portfolio management and investing, thereby the returns are met accordingly. Whereas in wealth management, the company takes a closer, more transparent look at the individual’s financial status and guides them in making financial decisions.
