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Apprehension on AMCs

Care has to be exercised as currently, a few AMCs are profitable

Is investing in funds of unprofitable asset management companies (AMCs) safe?

- Aditya Sharma

Your investments in mutual funds are not going to be directly affected from the AMC’s profitability, or lack of it. In the worst case scenario, when the company has to wind up its business, it will liquidate its assets and distribute them among the unit holders at the applicable NAV.

At present, a few AMCs are profitable. This is a business where income accrues from the assets that are managed by the company. It takes time for a company to acquire sufficient asset size to break-even. However, if a company stays unprofitable for a long time, it might cause upheavals in the management, and is a factor worth looking at while investing.

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