In past few years, there is an exception demand in mutual funds with record breaking inflows transforming the investment model. Providing a profitable alternative to traditional ban FDs (Fixed Deposits) & government securities, mutual funds provide an extensive range of investors whether risk-takers or those who prefer an advance approach. Now lets discuss more about Asset Management Company.
An Asset Management Company in India is a financial institution that manages investment on clients’ behalf. They get money from various investors & allocate it into different financial instruments like bonds, stocks & commodities. As per AMFI (Association of Mutual Funds) in India, the total assets of mutual funds under Assets Under Management surged from 6.75 trillion in Feb 2012 to Rs. 37.56 trillion by Feb 2022 which is a growth rate of more than 500% in just 10 years.
Importance of Asset Management Companies in India
These companies have skilled & certified experts who regularly monitors the market & economic conditions of the financial market to invest in various financial assets on clients’ behalf to assist them to reach their financial goals. They serve as a mediator between the financial market and investors. Asset Management Companies in India provide guidance & customised strategies to support them in building up their wealth.
Who Needs an Asset Management Company in India?
There are some important factors that you may take into consideration:
- Good Portfolio: If you want to invest in multiple asset classes, then professional management like Asset Management Companies can help you ensure you achieve your financial goals.
- Risk Assessment: These companies provide informed analytics & strategies to help investors manage risks & protect from market instability.
- Manage high net-worth: If you are having high net worth, then managing all it alone is very boring task. Asset Management Companies can help you handle your assets & invest them in diverse portfolios on your behalf to help them grow.
- Less Experience: If you do not have much experience in investments, then these companies can help you provide the important resources & guidance.
How AMCs Collect and Manage Funds in India?
AMCs collect funds from various investors & distributes them across various assets in the market to maximise returns & profits.
- Monitor the Performance: It is vital to monitor the portfolio regularly and adjust as per market dynamics. Asset Management Company management replaces underperforming assets with other alternatives to improve the performance.
- Market Research & Analysis: Asset Management Companies have skilled experts who manage market trends & analyse economic conditions & different features of the market to make informed decisions & maximise their returns.
- Allocation of an Asset: Based on various analysis & market research, the asset managers distribute funds among diverse funds like debt, bonds, real estate, equities, etc. The primary objective of diverse portfolios is to manage risk factors.
- Make a Portfolio: It is an important task for Asset Management Companies to build a portfolio which includes selecting bonds, debts, stocks, or other financial tools to be included in the portfolio to create a balanced portfolio & maximize profit.
Eligibility Criteria for Asset Management Company Registration in India
These companies are regulated & managed under the guidelines of SEBI. Also, such companies must comply with these regulations to be registered on the official list.
- Asset Management Companies must have a minimum net worth of Rs. 50 crores or more;
- Applicant must have a minimum of 2 people within a maximum of 5 years of experience in the investment market;
- Also, they must disclose their details completely and the funds to investors. It comprises of objectives, fees, investment strategy & performance history.
- Any professional working as fund managers must have the relevant qualifications in finance & accounting.
- The Registration Certificate with SEBI will be valid for 3 years, Asset Management Companies need to apply for renewal after completing the time period.
Different Types of Asset Management Companies in India
- Mutual Fund Company: AMCs in India re categorised as a Mutual Fund Company also known as Mutual Fund House and they are authorized the Mutual Fund Registration Under SEBI and the management of Mutual Funds by pooling money from individual investors with diversified portfolio of stocks, bonds & other securities.
- Hedge Fund Company: These companies are authorized to make use of strong strategies like derivative trading. Specially targeting the high net-worth of individual & institutional investors by making higher returns is the ultimate goal of these companies registered in India.
- Insurance Asset Managers: These companies are primarily responsible for the management and investment of the premiums collected from the policyholders.
- Exchange-Traded Fund Providers: These are AMCs that specially deal with a variety of exchange-traded funds.
- Private Equity Firm: These are the firms that usually invest in private companies to manage & restructure the value of the shares of private startups or experienced companies.
- Real Estate Investment Trust: These are AMCs that invest in real estate properties to generate rental income & capital appreciation over time.
- Pension Fund Managers: They are generally managing pension funds with low-risk, long-term investment strategy. The main objective of pension fund Asset Management Companies is to ensure the sufficiency of funds for future pension payments.
Several Metrics for Investors Choosing AMC
The following are some metrics that investors take into consideration while tying up an Asset management Company for their investment journey:
- Price to Sales Ratio: It is calculated by dividing the market capitalization of the company by its yearly revenue. The higher the P/S ratio more investors are willing to pay per unit of sales for a stock.
- Payout Ratio: It is calculated by dividing the annual dividend rate of the company by the total company’s earnings.
- P/E Ratio: Price to Earning Ratio calculates the current share price of the company relative to their per-share earnings on stock.
- Debt to Equity: This is calculated by dividing the company’s total liabilities by its stakeholders’ equity. A perfect debt to equity ratio is around 1 to 1.5. However, it depends on the company most often.
- Free Cash Flow: It I calculated by the Company’s cash flow statement, which is subtracted from its capital expenditure. It tells how much money the company generates.
Documents Required for Asset Management Company Registration
The following are the list of documents required for Asset Management Company Registration:
- In case of a Private Limited Company, the company must have a MoA, AoA & Scheme of Investment.
- DIN;
- KYC Documents;
- Identity Proof;
- Address Proof;
- PAN Card and Aadhar Card.
Process for Asset Management Company Registration
The following is the step-by-step process for Asset Management Company Registration:
- Research of Market and Know the Legal Structure: This is the first step for the registration process, you need to first conduct complete market research to analyse & decide the legal structure of the investment industry.
- File the Application: After the 1st step you need to prepare the application Form-D with SEBI. The applicants are authorized to submit all other important documents to the respective authority. The application & documents should e submitted along with the required fees as prescribed by SEBI.
- Verification of the Application: The SEBI will verify the application & documents, and SEBI is also authorized to verify & inspect any details or document presented.
- Issuance of Certificate: Once the application & documents are verified, then you will get the Registration Certificate.
Note: Once your get the Registration Certificate it is valid for 3 years from the date of issuance after that the applicant is required to renew the registration.
Why Whizseed?
Are you excited to start an investment management journey by implementing your savings? Then, choose us to enjoy the effective services that secure your Asset Management Company Registration in India. We will help you in:
- Assisting in setting up a business model;
- Provides Asset Management Services;
- Ensures timely AMC Registration with SEBI;
- Ensures evaluation so the investment market;
- Help you in post-incorporation compliances.
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