what is an asset management company amc 
an asset management company amc is a firm that invests pooled funds from clients putting the capital to work through different investments including stocks bonds real estate master limited partnerships and more along with high net worth individual hnwi portfolios amcs manage hedge funds and pension plans and to better serve smaller investors create pooled structures such as mutual funds index funds or exchange traded funds etfs which they can manage in a single centralized portfolio amcs are colloquially referred to as money managers or money management firms those that offer public mutual funds or etfs are also known as investment companies or mutual fund companies such businesses include vanguard group fidelity investments t rowe price and many others amcs are generally distinguished by their assets under management aum the amount of assets that they manage investopedia julie bangunderstanding asset management companies amcs because they have a larger pool of resources than the individual investor could access on their own amcs provide investors with more diversification and investing options buying for so many clients allows amcs to practice economies of scale often getting a price discount on their purchases pooling assets and paying out proportional returns also allows investors to avoid the minimum investment requirements often required when purchasing securities on their own as well as the ability to invest in a larger assortment of securities with a smaller amount of investment funds in most cases amcs charge a fee that is calculated as a percentage of the client s total aum this asset management fee is a defined annual percentage that is calculated and paid monthly for example if an amc charges a 1 annual fee it would charge 100 000 in annual fees to manage a portfolio worth 10 million however since portfolio values fluctuate on a daily and monthly basis the management fee calculated and paid every month will fluctuate monthly as well continuing with the above example if the 10 million portfolio increases to 12 million in the next year the amc will stand to make an additional 20 000 in management fees conversely if the 10 million portfolio declines to 8 million due to a market correction the amc s fee would be reduced by 20 000 thus charging fees as a percentage of aum serves to align the amc s interests with that of the client if the amc s clients prosper so does the amc but if the clients portfolios make losses the amc s revenues will decline as well most amcs set a minimum annual fee such as 5 000 or 10 000 in order to focus on clients that have a portfolio size of at least 500 000 or 1 million in addition some specialized amcs such as hedge funds may charge performance fees for generating returns above a set level or that beat a benchmark the two and twenty fee model is standard in the hedge fund industry typically amcs are considered buy side firms this status means they help their clients make investment decisions based on proprietary in house research and data analytics while also using security recommendations from sell side firms sell side firms such as investment banks and stockbrokers in contrast sell investment services to amcs and other investors they perform a great deal of market analysis looking at trends and creating projections their objective is to generate trade orders on which they can charge transaction fees or commissions asset management companies amcs vs brokerage housesbrokerage houses and amcs overlap in many ways along with trading securities and doing analysis many brokers advise and manage client portfolios often through a special private investment or wealth management division or subsidiary many also offer proprietary mutual funds their brokers may also act as advisors to clients discussing financial goals recommending products and assisting clients in other ways in general though brokerage houses accept nearly any client regardless of the amount they have to invest and these companies have a legal standard to provide suitable services suitable essentially means that as long as they make their best effort to manage the funds wisely and in line with their clients stated goals they are not responsible if their clients lose money in contrast most asset management firms are fiduciary firms held to a higher legal standard essentially fiduciaries must act in the best interest of their clients avoiding conflicts of interest at all times if they fail to do so they face criminal liability they re held to this higher standard in large part because money managers usually have discretionary trading powers over accounts that is they can buy sell and make investment decisions on their authority without consulting the client first in contrast brokers must ask permission before executing trades amcs usually execute their trades through a designated broker that brokerage also acts as the designated custodian that holds or houses an investor s account amcs also tend to have higher minimum investment thresholds than brokerages do and they charge fees rather than commissions professional legally liable managementportfolio diversificationgreater investment optionseconomies of scalesizeable management feeshigh account minimumsrisk of underperforming the marketexample of an asset management company amc as mentioned earlier purveyors of popular mutual fund families are technically amcs also many high profile banks and brokerages have asset management divisions usually for hnwi or institutions there are also private amcs that are not household names but are quite established in the investment field one such example is rmb capital an independent investment and advisory firm with approximately 10 billion in aum 1 headquartered in chicago with 10 other offices around the u s and roughly 142 employees rmb has different divisions including 2the firm also has a subsidiary rmb funds that manages six mutual funds 