Portfolio Management Services (PMS) is a customized service provided by qualified and experienced portfolio managers backed by a research team to High Net-worth Individuals (HNI) clients. A PMS investment portfolio can be a mix of stocks, fixed income, commodities, real estate, other structured products and cash.
It offers investment solutions for investors according to their risk tolerance and financial capability with an aim to deliver superior risk adjusted returns. It can be used as a tool to achieve financial goals.
Major difference between Mutual fund and PMS is that investors in Mutual funds get units that represent stocks. In a PMS, the investor holds the stock in a demat account owned by them, but the fund manager has the power of attorney to operate it.
It saves investors from all monitoring hassles with regular reviews and risk management. All this makes it an ideal investment avenue for high net worth investors.
PMS usually have a concentrated stock portfolio of 20-25 stocks; hence it has a better chance to generate superior returns over the underlying index provided it’s managed well whereas a mutual fund has a diversified portfolio of 40-50 stocks.
Minimum investment amount required to invest in PMS is Rs.50, 00,000 whereas investment in many mutual fund schemes can be started with even Rs 500.
Discretionary PMS - the portfolio manager has complete control over the portfolio. All financial decisions regarding investments are taken by the portfolio manager. Investor’s don’t have any say in taking the financial decisions. This is suitable for clients with limited time and understanding about investments. In India the majority of PMS are discretionary in nature.
Once you opt for a PMS, a separate bank account and a Demat account may be opened in your name. All investments are made in your name, and the shares are held in your name in your Demat account. The bank account is also credited with any gains or dividend pay-outs from the investments. Portfolio manager is given the power of attorney over this bank and Demat account. Investors can access these accounts any time to check the status of their investments.
Non-discretionary PMS - Financial decisions regarding investments are taken by investors and portfolio managers will only provide investment ideas.
However the execution of trade is done by the portfolio manager. This option is suitable for investors having good knowledge of investments.
Advisory - Portfolio manager provides investment ideas. Financial decisions regarding investments as well as execution of trade are done by investors.
Ask Investment Managers
Motilal Oswal Asset Management Company
White Oak Capital Management
ICICI Prudential Asset Management Company Limited
