Role of the AMC (Asset Management Company)
The asset management company (AMC) manages a mutual fund's schemes but does not own their assets. This lesson covers how an AMC is appointed, the conditions it must meet, the limits on its business and how it is paid.
What the AMC does
The AMC is appointed by the trustees, with SEBI's approval, to manage the mutual fund's schemes. It employs the fund managers, analysts, compliance officers and operations staff who do the daily work, and it must manage each scheme according to that scheme's stated investment objective.
One AMC can manage many schemes across equity, debt, hybrid and other categories. SEBI's categorisation generally allows one scheme per category for each AMC, with exceptions such as index funds tracking different indices and sectoral or thematic funds on different sectors or themes.
What the AMC does not own
The AMC is a manager, not an owner. The schemes' assets are held in trust under the trustees' oversight, and the securities are kept by a custodian. The AMC's own balance sheet is separate from the money it manages.
A scheme's gains and losses therefore belong to its unit holders, and the value of units rises and falls with the portfolio.
Conditions an AMC must meet
Under the SEBI (Mutual Funds) Regulations, 2026, an AMC set up under sponsor Route 1 needs a net worth of at least ₹50 crore; a sponsor using Route 2, which has no profit track-record test, must capitalise its AMC with more. Net worth is the AMC's own capital.
At least 50% of the AMC's directors must not be associates of the sponsor or the trustees, so that the board is not simply the sponsor's voice. An AMC may also carry on only the activities the Regulations permit: besides managing mutual fund schemes, these are management and advisory services for pooled funds and, subject to conditions, portfolio management services. It cannot take up unrelated businesses such as banking or real-estate development.
How the AMC is paid
The AMC does not send investors a bill. Its fee is charged to the scheme within the expense ratio, which is accrued daily and reflected in the NAV.
Since 1 April 2026 the base expense ratio covers the investment and advisory fee, recurring expenses such as registrar, custodian and audit costs, and distribution charges. SEBI caps it by slabs of the scheme's assets. Brokerage, transaction costs and statutory levies are charged outside it.
Rules at a glance
Three proposals before an AMC's board (illustrative)
The board of an AMC considers three ideas. The first is a new debt scheme in a category the AMC does not yet offer: that is its core business. The second is to offer portfolio management services: the Regulations permit this, subject to conditions.
The third is to start a property-development business. That falls outside the activities the Regulations permit, so the AMC cannot take it up.
How expenses reach the NAV (illustrative)
- Assumptions for the arithmetic only: a scheme has net assets of ₹1,000 crore, and total expenses charged to it are 1.50% a year. Actual assets change daily, so actual amounts vary.
- Expenses for a year = 1.50% × ₹1,000 crore = ₹15 crore. The AMC's own fee is one part of this.
- Daily accrual = ₹15 crore ÷ 365 = about ₹4.11 lakh a day, deducted in working out each day's NAV.
- For an investor whose units are worth ₹1,00,000: 1.50% × ₹1,00,000 = ₹1,500 a year, or about ₹4.11 a day.
Result. About ₹4.11 lakh a day is charged to the scheme, or about ₹4.11 a day on a ₹1,00,000 holding; the published NAV is already net of it.
Key points
- The AMC is appointed by the trustees, with SEBI's approval, to manage the schemes.
- It employs the fund managers and manages each scheme as per its stated objective.
- The AMC does not own the schemes' assets; they are held in trust under the trustees' oversight.
- An AMC set up under sponsor Route 1 needs a net worth of at least ₹50 crore; Route 2 requires more.
- At least 50% of the AMC's directors must not be associates of the sponsor or the trustees.
- An AMC may carry on only the activities the Regulations permit, and its fee is charged within the expense ratio.
Common misunderstandings
- The AMC does not own the money it manages: scheme assets are held in trust.
- The 50% rule is for the AMC's board: the trustee company has the stricter test of two-thirds independent directors.
- ₹50 crore is not the net worth for every AMC: it applies under sponsor Route 1, and Route 2 requires more.
- AMFI does not approve an AMC: the trustees appoint it and SEBI's approval is needed; AMFI is an industry association.
Questions people ask
Whose approval is needed to appoint an AMC?
SEBI's. The trustees appoint the AMC, and they also need SEBI's prior approval to end its appointment.
Can an AMC run any business it likes?
No. It may carry on only the activities the Regulations permit. Unrelated businesses such as banking or real-estate development are outside them.
How does an investor pay the AMC?
Indirectly. The AMC's fee is part of the scheme's expense ratio, accrued daily within the NAV.
What this lesson relies on
- SEBI (Mutual Funds) Regulations, 2026 — Regulations 5, 16, 66 and 67
- SEBI Master Circular for Mutual Funds (20 March 2026), Chapter 3 (one scheme per category and its exceptions)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.