The contours of an asset management company (AMC or asset management / investment management company/firm1 ) are defined by the Financial Services and Markets Act 2000 (section 237(2) of the Act). It is a company that is authorised to manage UCITS under certain prudential rules. The activities of an asset management company typically focus on the management of financial instruments such as investment funds, pension funds and investment portfolios. This also includes the management and administration of UCITS units, but also the provision of financial advisory services2 . UK UCITS are of course also regulated by the act above (sections 236A and 237 of the Act)3 .
If they deal with investment funds, asset management companies may also be named “mutual fund companies” or “investment companies”. Their activity of collecting money from investors, thus concentrating large investment volumes, allows these companies to be able to manage investment funds according to criteria of diversification and economy of scale. In many cases, the remuneration of these companies comes from a percentage of the volume invested in the fund4 .
An asset management company is responsible for all measures resulting from portfolio management and risk monitoring of special assets. It makes all investment decisions and examines investment proposals. It is also responsible for ensuring effective risk control (e.g. stress tests) in accordance with specific regulations. A key aspect of AMCs is that risk management, as well as asset and portfolio management, must work strictly separately from one another. It’s also very important that the AMC must guarantee constant liquidity for its payment and repayment obligations towards the fund’s investors.
As mentioned, a capital management company, or CMC, manages special funds, and the form of management involves investment funds for joint accounts of investors. However, there are also other forms of management, such as the UCITS capital management company and the AIF (Alternative Investment Fund Manager) capital management company, which differ in the type of investment fund managed. UCITS are investment funds that invest in securities and liquid financial instruments (stocks, bonds, money market papers, or mixed funds, as well as units in other UCITS, which are called “funds of funds”). UCITS units will be redeemed or paid out immediately at the request of the unit holders.
AIFs differ from UCITS in that they invest in all other areas (e.g. in real estate, private equity or venture capital funds), or use other financial instruments (hedge funds). Another feature is that the fund does not consist of securities. It is worth mentioning that even AIFs have to be approved by the FCA and subject to the full requirements of UK AIFMD5 .
ADV Rating ranked the world’s largest asset management companies in 20226 . Here is the list of the top twenty by capital management: BlackRock, Vanguard Group, UBS Group, Fidelity Investments, State Street Global Advisors, Morgan Stanley, JPMorgan Chase, Allianz Group, Capital Group, Goldman Sachs, BNY Mellon, Amundi, PIMCO, Legal & General, Prudential Financial, Deutsche Bank, Bank of America, Invesco, T. Rowe Price, Credit Suisse.
To learn more about how a mutual fund works, see:
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