How Does an Asset Management Company (AMC) Function?
1. Providing Profitable Investment: The main function of an AMC is to make the best use of client’s asset in the most efficient, effective and profitable investment possible. So, as an initial step of investment, AMCs do a thorough research on the market and then analyses the data and facts so as to define the financial goals and objective. In this step of research and analysis, careful judgement of the risk associated with each financial deal is looked into.
2. Allocation of Assets: The next step is the allocation of assets, i.e., selecting the assets and securities in which investment would be carried on. After selection of assets, allocation of funds takes place to buy those assets and securities. The returns earned from the investments are the profit on the investment and those are shared between the fund manager and the investor.
3. Portfolio Building: Once, the market research and fund and asset allocation is conducted, it is time for the portfolio building. The fund managers tries to design a diversified and strong portfolio which can reap high profits for their clients. Lastly, after considering all the relevant factors, they take a decision to either buy, sell or hold those assets or securities.
4. Performance Review: Finally, the last work of an AMC is to timely review their investments and take justifiable decisions. This step can be called as the performance review. As the fund managers are using funds from investors, so they are liable to respond to queries and decisions taken by them. The fund managers should give proper justification as to why a particular asset is bought, sold or kept at holding position.
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