An asset management company (AMC) is a corporation that pools client assets and invests them in a variety of investments such as stocks, bonds, real estate, master limited partnerships, and more. AMCs manage hedge funds and pension plans, as well as pooled structures like mutual funds, index funds, and exchange-traded funds (ETFs), which they can manage in a single consolidated portfolio to better serve smaller investors.

AMCs are also known as money managers or money management organizations.  Investment firms or mutual fund companies are companies that offer public mutual funds or ETFs. Vanguard Group, Fidelity Investments, T. Rowe Price, and other companies fall into this category.

AMCs are distinguished by their Assets under management (AUM), or the total value of the assets they control. Also read: What are ELSS Funds?

AMCs provide an additional variety and investment possibilities to investors because they have access to a broader pool of resources than an individual investor might.  A GMC buys for so many clients, so that, they can get benefit from economies of scale and often earn a discount on their purchases.

Investors can escape the minimum investment requirements that are sometimes required when acquiring securities on their own by pooling assets and receiving proportional returns, as well as investing in a larger variety of securities with a lesser quantity of investing funds.

AMC Fee Structure

AMCs often charge a fee that is based on a percentage of the client’s total AUM. This asset management charge is calculated and paid monthly and is based on an annual percentage. If an AMC charges 1% yearly costs, for example, it would charge $100,000 in annual fees to manage a $10 million portfolio. However, because portfolio values fluctuate on a daily and monthly basis, the monthly management fee estimated and paid will also fluctuate.

Continuing with the previous example, the AMC will earn an additional $20,000 in management fees if the $10 million portfolio grows to $12 million in the next year. If, on the other hand, the $10 million portfolio drops to $8 million owing to a market downturn, the AMC’s fee would be reduced by $20,000.

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