In the Indian context, three parties are central to a Mutual Fund. These are the Sponsor, the Asset Management Company (AMC), and the Trustees.
The Sponsor is the company which set up the mutual fund. To promote a mutual fund, the Sponsor has to meet criteria laid down by SEBI. These criteria broadly deal with sufficient net worth, and past track record in terms of fair dealings and integrity. Only those who qualify in terms of these criteria are permitted by SEBI to set up a mutual fund.
The Asset Management Company (AMC in brief) manages the funds of the various schemes. The AMC employs a large number of professionals for investments and research and for investor and agent servicing.
The AMC also comes out with new schemes periodic call. It plays a key role in the running of a mutual fund and it operates under the supervision and guidance of the Trustees.
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The Trustees are an important link in the working of a Mutual Fund. Trustees are people with long experience who have earned a name for themselves for financial integrity and excellence in their fields. It is the responsibility of the Trustees to see that the AMC always acts in the best interest of the investors.
Thus, they carry the crucial responsibility of safeguarding the investor’s interest. They do this by constant monitoring of the operations of the schemes.
AMC supplies all information demanded by the Trustees on a regular basis. In fact in the developed countries, a Mutual Fund outsources all their activities and their own employees are far and few.