Best Asset Management Companies in India: Role, Types, Guidelines for Investors, & More
When you are thinking about investing in mutual funds, you may come across the term “AMC” quite often. Asset Management Companies (AMCs) play a crucial role in the world of mutual funds. These companies are responsible for managing pooled funds from investors and investing them in various securities like stocks, bonds, and other assets. The expertise and resources of an AMC may significantly influence the performance of your investments. Therefore, understanding which AMCs are considered top players in India can help you make more informed decisions. In this article, let’s explore some of the top asset management companies in India, understand how they work, factors to consider before choosing an AMC, SEBI and AMFI guidelines for investors, and more. Let’s dive in.
What is an Asset Management Company?
An Asset Management Company (AMC) is an entity that channels funds from various clients into diverse investments, such as stocks, bonds, real estate (REIT), and master limited partnerships. Beyond overseeing high-net-worth individual portfolios, AMCs can handle hedge funds and pension plans. To cater to smaller investors, they may establish pooled structures. This includes the association of mutual funds in India, index funds, or exchange-traded funds (ETFs).
Therefore, Asset management firms are frequently known as money managers or money management companies.
What is the Meaning of AUM (Assets Under Management)?
Assets Under Management (AUM) represents the collective market value of investments or assets overseen by financial entities. These may include mutual funds, hedge funds, wealth management firms, and portfolio managers. Essentially, it signifies the total financial resources under the control of an individual or entity.
It can be referred to as various terms, including fund houses, money managers, and money management firms.
Alternatively, AUM can denote the overall value of all assets managed by an entity on behalf of its clients. For instance, AUM, standing for Assets Under Management, encapsulates the comprehensive market value of assets overseen by specific clients.
List of Top Asset Management Companies in India 2024
Let’s have a look at the top 10 mutual fund companies in India that you might consider investing in.
| AMC Name | AUM (in Cr) | Total Number of Schemes |
|---|---|---|
| SBI Funds Management Ltd | ₹ 10,53,287.90 | 488 |
| ICICI Prudential Asset Management Company Limited | ₹ 8,28,586.78 | 755 |
| HDFC Asset Management Co Ltd | ₹ 7,17,582.72 | 410 |
| Nippon Life India Asset Management Ltd | ₹ 5,17,294.68 | 755 |
| Kotak Mahindra Asset Management Co Ltd | ₹ 4,58,734.51 | 485 |
| Aditya Birla Sun Life AMC Ltd | ₹ 3,67,634.89 | 600 |
| UTI Asset Management Co Ltd | ₹ 2,99,738.35 | 634 |
| Axis Asset Management Company Limited | ₹ 2,93,860.65 | 550 |
| Mirae Asset Investment Managers (India) Private Limited | ₹ 1,83,547.87 | 255 |
| Tata Asset Management Limited | ₹ 1,71,975.23 | 376 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top asset management companies in India in the list is from 13th August 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Overview of the Top 10 AMCs in India
Let’s have a look at the top 10 mutual fund companies in India.
1. SBI Funds Management Ltd
SBI Funds Management Ltd, a joint venture between the State Bank of India (SBI) and Amundi, a European asset management company, was founded in 1987. As of the latest data, it manages an Asset Under Management (AUM) of Rs. 10,53,287.90 cr. and offers a total of 488 schemes. It is one of the largest and most trusted asset management companies in India, leveraging SBI’s vast network and Amundi’s global expertise.
2. ICICI Prudential Asset Management Company Limited
ICICI Prudential AMC was established in 1993 as a joint venture between ICICI Bank, one of India’s leading private sector banks, and Prudential Plc, a leading international financial services group. With an AUM of Rs. 8,28,586.78 cr., ICICI Prudential AMC manages 755 schemes, making it one of the top players in the Indian mutual fund industry. The company is known for its diverse portfolio and innovative investment solutions.
3. HDFC Asset Management Co Ltd
Founded in 1999, HDFC Asset Management Co Ltd is a subsidiary of HDFC Ltd, a leading provider of housing finance in India. The company has established itself as one of the largest AMCs in the country with an AUM of Rs. 7,17,582.72 cr., managing 410 schemes. HDFC AMC is widely respected for its consistent performance and customer-centric approach.
4. Nippon Life India Asset Management Ltd
Nippon Life India Asset Management Ltd, formerly known as Reliance Nippon Life Asset Management, is a part of the Nippon Life Insurance group of Japan. It was established in 1995 and has grown to manage an AUM of Rs. 5,17,294.68 cr. with a total of 755 schemes. The company benefits from its strong global presence and wide-ranging product offerings.
5. Kotak Mahindra Asset Management Co Ltd
Kotak Mahindra Asset Management Co Ltd is a subsidiary of Kotak Mahindra Bank, one of India’s leading financial services conglomerates. Established in 1998, the company manages an AUM of Rs. 4,58,734.51 cr. across 485 schemes. Kotak AMC is known for its innovative products and disciplined investment strategies.
6. Aditya Birla Sun Life AMC Ltd
Aditya Birla Sun Life AMC Ltd, a joint venture between the Aditya Birla Group and Sun Life Financial Inc. of Canada, was established in 1994. The AMC has an AUM of Rs. 3,67,634.89 cr. and manages 600 schemes. It is one of the leading fund houses in India, known for its extensive reach and robust investment processes.
7. UTI Asset Management Co Ltd
UTI Asset Management Co Ltd, established in 1964, is one of the oldest and most trusted AMCs in India. With an AUM of Rs. 2,99,738.35 cr. and 634 schemes, UTI AMC has a long-standing legacy and a wide distribution network. The company plays a significant role in the Indian mutual fund industry with its diversified offerings.
8. Axis Asset Management Company Limited
Axis AMC, a subsidiary of Axis Bank, was established in 2009. It has quickly risen to prominence with an AUM of Rs. 2,93,860.65 cr. and 550 schemes under its management. The company is known for its strong equity offerings and customer-centric approach.
9. Mirae Asset Investment Managers (India) Private Limited
Mirae Asset India, a part of the South Korea-based Mirae Asset Financial Group, was established in 2007. It manages an AUM of Rs. 1,83,547.87 cr. with 255 schemes. The AMC has gained a strong foothold in the Indian market with its focus on performance and innovation.
10. Tata Asset Management Limited
Tata Asset Management Limited, part of the Tata Group, one of India’s largest and most respected conglomerates, was founded in 1994. With an AUM of Rs. 1,71,975.23 cr. and 376 schemes, Tata AMC is known for its reliability, strong governance, and diverse investment options.
Role of AMCs in Mutual Fund Investments
Asset Management Companies (AMCs) play a crucial role in the mutual fund investment ecosystem. Their primary function is to manage and oversee mutual fund schemes on behalf of investors. Here are the key roles of AMCs in mutual fund investments:
Fund Management
AMCs are responsible for the day-to-day management of mutual fund schemes. They employ fund managers and analysts who make investment decisions based on market conditions, economic trends, and the fund’s investment objectives.
Scheme Creation and Management
AMCs design and create different mutual fund schemes with specific investment objectives, risk profiles, and asset allocations. They manage a variety of funds, including equity funds, debt funds, hybrid funds, and more, catering to the diverse needs of investors.
Investment Research
AMCs conduct thorough research on financial markets, sectors, and individual securities to make informed investment decisions. This research is essential for optimising the performance of the mutual fund schemes managed by the AMC.
Distribution of Mutual Fund Units
AMCs distribute mutual fund units through various channels, including banks, financial institutions, online platforms, and independent financial advisors. They play a crucial role in making mutual fund investments accessible to a wide range of investors.
Fee Structure
The fee structure typically includes a management fee, which is a percentage of the fund’s average assets under management (AUM), and other charges. This revenue model aligns the interests of the AMC with the performance of the mutual fund.
Regulation
An Asset Management Company (AMC) is regulated by the capital market regulator, Securities and Exchange of India (SEBI).
Overview of the Indian Asset Management Industry
The Indian Asset Management Industry has continued its impressive growth trajectory, bolstered by increasing investor participation and favorable market conditions. The industry’s Assets Under Management (AUM) have reached approximately ₹64.97 lakh crore, representing a significant increase from previous years.
This growth has been primarily driven by strong inflows into equity mutual funds and sustained contributions through Systematic Investment Plans (SIPs). In May 2024 alone, the mutual fund industry’s net AUM climbed to ₹58.91 lakh crore, with SIP contributions reaching an all-time high of ₹20,904 crore.
Additionally, the market is witnessing a shift towards small and mid-cap funds, which have shown remarkable growth, with some segments increasing by over 30% in the first half of 2024. This trend reflects a strategic pivot by investors seeking higher growth opportunities in these segments.
This continued growth is supported by regulatory developments from SEBI, such as stricter norms on fund categorisation and fee structures, which aim to enhance transparency and investor protection. Furthermore, a favourable economic environment, including a stable political climate and a rebound in global trade, has contributed to the rising number of investors. The number of mutual fund folios reached nearly 20 crore as of July 2024, highlighting increased retail participation. The overall outlook for the Indian asset management industry remains positive, with expectations of further expansion in the coming years, driven by a growing economy and increasing financial literacy.
Types of Funds Offered by AMCs in India
Here are several types of mutual funds by AMCs in India.
| Features | Type of Mutual Funds |
|---|---|
| Based on Structure | Open-Ended FundsClose-Ended FundsInterval Funds |
| Based on Asset Class | Multi-Cap Fund Large-Cap FundLarge and Mid-Cap FundsMid-Cap FundSmall-Cap fundFlexi-Cap fundEquity Linked Savings Scheme (ELSS)Equity FundDebt FundMoney Market FundHybrid Funds |
| Based on Portfolio Management | Active FundsPassive Funds |
| Based on Investment Objective | Growth FundsRegular Income FundLiquid FundsTax-saving Fund |
How Does an AMC Manage the Funds?
You may invest in mutual funds directly with an AMC or asset management company. The AMC takes a leading role in managing the mutual fund, making decisions that align with the investment objectives of the scheme, all under the guidance of a fund manager. The process is broadly listed below.
- Asset Allocation: It can be a key aspect of Mutual Funds. Each fund has a specific investment objective, guiding the fund manager in choosing where to invest. For instance, debt-oriented funds focus on bonds, while balanced funds invest in a mix of stocks and fixed-income securities.
- Portfolio Construction & Analysis: Building a portfolio requires a lot of research as one needs to analyse the assets. Experts may examine market trends & micro and macro-economic factors. Thus, it provides reports to the fund manager who, in turn, makes investment decisions aligned with fund objectives.
- Performance Evaluation: An asset management company can be held accountable to mutual fund investors by sharing essential information like sales, repurchases, NAV, and portfolio details. In simple terms, AMCs must answer to the investors of the mutual funds and look after their interests.
Different Types of Asset Management Companies
Asset Management Companies in India can be of different types:
- Mutual Fund
- Exchange-Traded Fund (ETF)
- Hedge Fund
- Private Equity Funds
- Index Funds
Additionally, AMCs invest on behalf of various types of clients.
- Retail Investors
- Institutional Investors
- Public Sector Investors
- High-Net Worth Clients
Factors to Consider Before Choosing the Right AMC
Choosing the right asset management company can be a crucial successful investment journey. Here are some of the key factors to consider:
Investment Philosophy and Track Record
When assessing an asset management company, you might want to analyze its investment philosophy and historical performance across different market cycles. A consistent outperformance compared to benchmarks may indicate a robust investment approach and could be a positive sign of the company’s reliability.
Fund Range and Suitability
Consider the variety of funds that the asset management firm offers. It’s important to ensure these funds align with your risk appetite and investment goals. You should also verify that the company provides options across the asset classes and risk profiles you are interested in.
Fund Performance and Expense Ratio
You may find it useful to compare the performance of specific funds within your chosen category against peers and benchmark indices. Additionally, evaluating the expense ratio is crucial, as lower fees typically contribute to higher net returns over time.
Management Expertise and Experience
Evaluating the expertise and experience of the fund managers can also be important. A skilled and proven management team may inspire confidence in the company’s decision-making abilities and enhance trust in their investment strategies.
Transparency and Communication
Lastly, consider the transparency and communication practices of the asset management company. It can be beneficial to choose a company that provides clear and timely information on fund performance, portfolio updates, and any changes in the investment strategy. This transparency can help you stay informed and make better decisions regarding your investments.
The Reliability of AMC When Compared to Banks
When considering financial security, you may often wonder about the reliability of Asset Management Companies (AMCs) versus banks. Both institutions play significant roles in the financial ecosystem, but they operate quite differently, and this can affect their perceived reliability.
Banks are traditionally seen as highly reliable due to their regulatory oversight and the guarantees they offer. In India, for instance, deposits up to a certain limit are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), providing a level of safety that you might find reassuring.
On the other hand, AMCs manage mutual funds and other investment products. The reliability of an AMC might be gauged by its track record, the diversity of its offerings, and its compliance with the Securities and Exchange Board of India (SEBI) regulations. However, unlike banks, investments in AMCs are subject to market risks. This means that while AMCs might offer the potential for higher returns, there is also a risk that you could lose some or all of your capital.
It’s essential to understand that reliability in the context of financial institutions can be subjective and dependent on your financial goals. While banks offer stability and guaranteed returns, AMCs provide opportunities for wealth creation, albeit with higher risks. Thus, assessing the reliability of AMCs compared to banks largely depends on your risk tolerance and investment horizon.
Understanding SEBI and AMFI in AMC Operations
SEBI (Securities and Exchange Board of India) and AMFI (Association of Mutual Funds in India) play crucial roles in overseeing and regulating the operations of Asset Management Companies (AMCs) in the financial markets. SEBI, as the regulatory authority, mutual fund companies have formed the AMFI. It ensures compliance with regulations, safeguards investor interests, and maintains the integrity of the securities market.
On the other hand, AMFI, as a self-regulatory organisation, works to promote ethical practices, standardise industry norms, and enhance investor awareness. Together, they contribute to AMC operations’ transparency, efficiency, and integrity, fostering a trustworthy environment for investors.
Additionally, RBI also plays an essential role in regulating AMCs, and mutual funds need approval if they are launching guaranteed schemes.
SEBI and AMFI Guidelines Investors Should Know
Here is a list of the following guidelines and practices that SEBI and AMFI follow:
- An Asset Management Company shall not serve as the trustee of any mutual fund.
- The company cannot invest in its schemes without full disclosure of its intent in the offer documents.
- They shall submit quarterly reports on the asset management company’s activities, and compliance must be submitted to the trustees.
- The personnel in the AMC should have a clean record and be free from economic offences like fraud or insider trading.
- The Chairman of an Asset Management company is barred from being a trustee for any mutual fund.
- An Asset Management Company is required to maintain a net worth of less than Rs 10 crores.
- SEBI outlines guidelines for AMC reports to be submitted to trustees, including a bi-monthly compliance certificate.
Benefits to Asset Management Companies in India
There are various benefits of asset management companies in India.
- Management Fees: The Asset Management Company (AMC) earns management fees for overseeing and managing the assets within their mutual funds. These fees are typically a percentage of the total assets under management (AUM).
- Performance Fees: Some AMCs may earn performance fees based on the fund’s performance exceeding a specified benchmark. Thus, this provides an additional source of revenue when the fund outperforms expectations.
- Distribution Fees: An Asset Management Company may receive distribution fees for promoting and selling their mutual fund products. These fees compensate for the costs associated with marketing and distribution efforts.
- Economies of Scale: As AUM increases, AMCs can benefit from economies of scale. Thus, the larger AUM allows for the spreading of fixed costs, potentially leading to improved profit margins.
Downsides to Asset Management Companies in India
An asset management company in India also comes with a few downsides.
- Fees and Expenses: One significant downside is the fees and expenses associated with managing assets. Investors often incur management fees, which can impact overall returns and reduce the profitability of investments.
- Market Risk Exposure: Asset Management Companies (AMCs) are inherently exposed to market risks. A decrease in the value of assets under management, affecting both the company and its investors, can result from economic downturns or unfavourable market conditions.
- Performance Fluctuations: The performance of mutual funds managed by AMCs is subject to market fluctuations. Poor investment decisions, economic uncertainties, or changes in market trends can lead to underperformance, impacting investor returns.
- Conflict of Interest: Conflicts of interest may arise for AMCs. This may particularly happen when managing multiple funds with varying objectives. Balancing the interests of different funds and their investors can be challenging and may not always align with individual investors’ goals.
- Regulatory Changes: Regulatory changes in the financial industry can impact the operations of an Asset Management Company. New regulations or changes in existing ones may require adjustments to fund management strategies, potentially affecting investor outcomes.
Points to Remember Before Choosing an AMC
It is important for investors to carefully evaluate the track record of the AMC. While AMCs are obligated to adhere to the investment objectives, it is advisable for investors to stay informed about AMC-related news, such as alterations in fund managers and the performance of the schemes managed by the fund. Below are some key factors investors may contemplate when selecting an AMC:
Market Reputation of the AMC
Establishing a market reputation is a gradual process that unfolds under various market conditions. Factors such as consistent performance, stability in management, a pristine track record, and other elements collectively contribute to shaping the organisation’s standing in the market.
Role of the Fund Manager
The Fund Manager assumes the responsibility of making investments on behalf of investors. Possessing extensive experience in the capital market, these market experts play a crucial role. AMC may prefer seasoned professionals to handle investment decisions, emphasising the importance of closely monitoring the credentials and work experience of the appointed fund manager.
Example of an Asset Management Company (AMC)
One prominent example of an Asset Management Company (AMC) in India is HDFC Asset Management Company Limited (HDFC AMC). Established in 1999, HDFC AMC is a leading player in the Indian mutual fund industry. It is a joint venture between Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited.
To Wrap It Up…
In conclusion, the market reputation of an Asset Management Company (AMC) is a nuanced interplay of factors such as consistent performance, management stability, and a commendable track record. As investors navigate the complexities of the financial markets, staying informed about the AMC’s standing, fund offerings, and the expertise of the fund manager is crucial.
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Frequently Asked Questions(FAQs) on Asset Management Company(AMC)
An Asset Management Company manages investment funds and creates portfolios, while brokerage houses facilitate securities trading.
Asset Management Companies in India are regulated by the Securities and Exchange Board of India (SEBI). SEBI sets guidelines, monitors compliance, and ensures the overall functioning and integrity of AMCs.
An Asset Management Company’s job is to make smart decisions about where to invest this money, aiming to earn profits for the investors. Investors buy shares in these funds, and the AMC uses the combined money to buy different types of assets like stocks or bonds.
AMCs generate returns by investing pooled funds in a diversified portfolio of assets like stocks, bonds, and other securities. Fund managers actively manage these investments to optimize returns while mitigating risks.
To get started with investing in an Asset Management Company (AMC), you can first choose an AMC based on its reputation and fund performance. Next, complete your KYC (Know Your Customer) process, which is mandatory for mutual fund investments. After that, select a mutual fund scheme that aligns with your financial goals and invest online or offline through the AMC’s website or an investment platform.
