Asset management companies (AMC) are responsible for launching mutual fund schemes in the market. Some of the AMCshave the best schemes in their kitty while some them doesn’t have a single scheme worth considering. The performance of the schemes is considerably dependent on various parameters. The AMC that operates the scheme is also included in one of the parameters. The work ethics, approach, and the experience of an AMC influence mutual fund performances. Check out the following aspects that will assist you in determining the best performing AMC.
Incorporation and Regulation
The credibility of an AMC is depicted by the authorization of the firm. An AMC should be registered under Companies Act that allows it to perform functions suitable for a wealth management firm. Further, it should adhere to the rules and regulations of the government. The most important aspect is registration with the Securities and Exchange Board of India (SEBI). SEBI is responsible for regulating AMCs and ensure that the investor’s money is safe and sound.
Each and every AMC has its own way of operating. When it comes to investment, it is a matter of concern as the investor’s money is at stake. Not only this, the reputation of the firm is also at stake. Thus, AMCs keep on inventing efficient ways of investing money. For this, a dedicated team of researchers and analysts works on various prospects. An innovative investment approach and forecasting the future performance aid in enhancing returns and winning investor’s trust. To determine the success of an AMC, you can consider various tools like Standard Deviation, Alpha, Beta, Sharpe Ratio, and so on.
The fund management team comprises of the fund managers and other experts who have the sole aim of driving maximum returns on investment. Since AMC handles various types of mutual fund schemes, it requires managers who have prior experience and prerequisite qualifications of handling portfolios. If an AMC is performing exceptionally well in all categories, you can assume that this AMC deserves your attention. You can invest your money in any of the schemes offered by the firm.
In some cases, some AMCs have expertise in a particular niche. For example, a firm may serve as a terrific direct mutual fund platform. If you want to invest in a direct mutual fund, you can consider this particular firm.
Assets under Management (AUM)
There is a notion amongst investors that the scheme with the biggest portfolio is the best one. Well, this may not be true. There are AMCs with schemes with a less-than-average AUM but they are performing better than the large ones. You should seek an AMC whose AUM varies around an average value. This is because if the AUM is low, the expenses will be high and if the AUM is very high, there are risks of volatility.
Although higher AUM performs very well, there will be a problem if any of the big investors leave the scheme. Sometimes, the saturation sets in and the fund manager doesn’t have enough investment options left.
Performance and Ratings
According to the market performance and quartile rankings, you will be able to identify certain mutual fund schemes that are producing impressive returns for quite a long time. You can consider these schemes or other schemes offered by the same AMC. However, check out the past performance, AUM, and other factors before investing your money.
In addition to this, you can also analyze the authority of a mutual fund scheme offered by an AMC on the basis of CRISL ratings and SEBI ranking mechanism.