AMC market value should be larger than Banks or NBFC

Great PMS manager Shankar Sharma once enlightened us, in an interview. An Asset Management Company has zero risk. It transfers all it’s risk to…

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Great PMS manager Shankar Sharma once enlightened us, in an interview.

An Asset Management Company has zero risk. It transfers all it’s risk to the investors. Think of Franklin Debt fund winding up.

A bank bears the risk of Default by the company or individual who borrows. Bank must repay it’s depositors. Yes Bank paid it’s fixed depositors.

Thus Shankar sir advocates valuation of AMC companies should be 10-20 times Higher than those of Banks of NBFCs

All an AMC has to do is keep increasing it’s Asset Under Management and earn Risk free fee (expense Ratio)
That’s a good business for an Share holder.

I want to echo his thought. His point of view made sense to me.

Then I questioned myself. There are 4 people in the room
✓shareholder
✓AMC
✓The fund Manager working for AMC
✓The Investor.

An deal happens only if, at least one person in the group is an idiot.

When you are In a group of people making a deal. If you can’t find that idiot. Then it’s probably ‘you’.

Out of 4 parties, I am sure top 3 are not idiots. They have there ground covered very well.

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Sujith Salunkhe

Btech in Information Technology followed by an PG in Financial engineering & Risk Management from National Institute of Securities Markets. Certified Investment Advisor XB, FRM (USGARP) .

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