Portfolio Management Services in India – An Overview for Better Portfolio Investment

Portfolio Management Services(PMS) is a complete fund investment service by portfolio managers helping investors to invest and manage their folios or equity funds to achieve the desired rate of return. Having extensive knowledge about securities, market conditions, and calculating Return Risk Ratio is a part of the process. Not every individual is aware of the process and risks involved with investment, and this is where Portfolio Management Services in India comes into the role.

Portfolio Management Services in India

What is Portfolio Management Services?

Portfolio Management Services or PMS is a methodical way to maximize profits on your assets while lowering the risk component. It allows you to effortlessly make wise selections that are backed by substantial investigation and verifiable information. Since investing in stock and other finance portfolios involves risk, one needs to have a proper backup to handle market difficulties.

In other words, PMS customizes investment plans for each investor based on their financial capacity and risk tolerance. Decisions on the solutions revolve around debt vs. equity investment, risk-to-return ratios, and investor’s time horizon, or the length of time they are ready to commit to investing.

Portfolio Management Services in India is offered to high net worth valuable clients. The portfolio manager drafts an Investment Policy Statement (IPS) covering the client’s financial position and investment return needs.

What are the Types of Portfolio Management Services in India?

When you decide to use portfolio management services in India, the very first thing to do is open a different bank account. Investors would also require a Demat Account, which is a part of portfolio investment. Your investments will be kept in the Demat account, and your bank account will be credited with the profits. There are different types of Portfolio Management Services in India you can choose. Some of these are-

  • Active portfolio management: The goal of this type is to outperform a market index, like Nifty. To outperform the index, an active portfolio manager will have positions that differ from the tracking index’s and will actively buy and sell securities in accordance with institutional research. However, the strategy takes on more risk to get an extra return.
  • Passive Portfolio Management: The aim of this service is to allocate funds to the same stocks at comparable weights and seeks to replicate the performance of an index. We call this index investment or indexing. However, the transaction costs are quite low due to less portfolio churning with securities turnover than with active management.
  • Discretionary Portfolio Management: Under this PMS, investment funds are entrusted to a manager or broker, who has the authority to make investments on the client’s behalf. In this case, the investor needs to just put in cash—not time. Once you have a word with the broker regarding your investment objectives, everything will be taken care of, and you can rest assured of good returns. The fund manager will do the job, so you can rip the seed of profit without any risk. Discretionary Portfolio Management is best if you want to avoid stress and do not have a lot of time to attend to every sale and purchase of every stock.
  • Non-Discretionary Portfolio Management: This portfolio management is best for those who don’t want to hand over the portfolio to others. Under this the portfolio manager is a counselor, offering you advice according to your funding objectives. Whether or not to heed the counsel would be entirely up to you. Selecting a workable plan and making sure it is presented logically are crucial, regardless of whether you choose to work with a portfolio manager or handle the task yourself.

What is the Process of Portfolio Management Services?

The portfolio manager has complete insight into the market, defines investment objectives, converts them into attainable goals, assigns assets to meet those goals, and rebalances the portfolio to correct any mismatch in the risk. There is a complete process involved in PMS. These are-

  • Planning: Creating an Investor Policy Statement (IPS) is the first step in the portfolio management process. From an investor’s perspective, willingness and ability to take risks are defined in the investor policy statement. Additionally, it establishes the investors’ goals about risk and returns while taking each person’s IPS into consideration.
  • Execution: The second phase is called execution, and it entails dividing the investment corpus among different asset classes and products within those asset classes to satisfy the IPS’s specified risk-return profile.
  • Feedback: This process involves keeping an eye on the overall performance of the portfolio and adjusting the assets as per the required returns needed In case, the folio works as per the expectation, the manager can rebalance the same for higher returns.

What Benefits do Portfolio Management Services offer?

When you seek PMS for investment purposes, you come across multiple benefits. Some of these are-

  • Asset Diversification

One of the major benefits of investing in PMS is the asset diversification and investing research involved There is a lot of technical analysis involved to support the investment decisions made by the skilled fund managers that oversee PMS. The dates of admission and departure are decided by fund managers who have experience in management.

  • Customization of Portfolios

Any PMS’s unique selling point is the degree of customization offered to individual investors. An investor can select the asset mix using PMS according to their level of risk tolerance. The investor’s liquidity requirements and investment objective are considered while customizing the portfolio.

  • Tax Planning

When making investments, an investor has a number of tax obligations to follow. Moreover, investors may be able to lower the tax liability they face by utilising several tax provisions. Experts handling your portfolio make sure all of your investments are compliant with tax laws and can help you avoid taxes.

  • Controlled by Government Rules

PMS are majorly controlled by government rules, and fund managers need to follow the same. Portfolio managers must provide government agencies with transaction statements, cost details, holdings, and other information on a regular basis. They must give investors access to their holding statements, income, costs, benchmarking, and comparable fund performance.

  • Instant Folio Access

The majority of fund managers work online and have created web portals for investors to access complete details on a real-time basis. They are given instant access to information about the holdings, expenses, and values of their portfolio. Investors will get complete access to folio reports to understand investing rationale. Investors may also redeem, sell, or top up the portfolio online.

What are the PMS Charges in India?

When you look for Portfolio Management Services in India, you are levied with certain charges in every step of the Services. These are-

  • Entry Load– Also called the Entry fee, it is levied when you start your investment using PMS. The general cost is around 3%.
  • Management Charges: In a PMS, management charges involve managing the entire portfolio. The cost may vary between 1% to 3% and is billed on a quarterly basis.
  • Profit Sharing: When you sign the agreement with the PMS provider, there will be a mention of the profit-sharing percentage. The percentage may differ from Services to Services.

List of Top PMSes in India

According to market experts, the total assets managed by portfolio managers in India in the last 5 years is around Rs 27.9 lakh crore in the financial year ending 2022-23. With more and more people being exposed to the benefits of stock & fund investment, availability of information, and multiple options of PMSes in India, the number is set to grow.  We list down the top Portfolio Management Services in India.

PMS Company Fixed Fees (PA) AUM (in cr) Performance Fee Brokerage and Exit Load
Motilal Oswal 2% – 2.25% Rs 10,200 0.3% brokerage per transaction; 1% – 2% load
Alchemy PMS 2% – 2.5% Rs 6010.49
Nippon PMS 2% – 2.5% Rs 3.49 lakh
Kotak PMS 2.50% Rs 1900 0.1% brokerage per transaction; 3%, 2%, 1% year-wise load
Birla Sun Life PMS 2.5% Rs 10,187 1.2% – 2.2%
Angel Broking 2% Rs 132,540 0.5% brokerage per transaction
ASK Growth Portfolio 1.5% 3290 1.5% plus 20% above 10% profits 1yr(5%), 2yr(4%), 3yr(3%), 4yr (1%)
SageOne- Core Portfolio 2.5 2750 1yr(3%), 2yr(2%), 3yr(1%)

Conclusion

Like any other form of fund investment, portfolio management also involves some risk elements. However, the terms and conditions involved in the management Services will help you to outline the danger associated with the Services. PMS operates in line with the objectives and preferences of the investor. So, choosing the right Portfolio Management Services in India will help you manage your funds and encourage a good return on investment.

FAQs for Portfolio Management Services (PMS) in India:

1. What is Portfolio Management Services (PMS)?

Ans: Portfolio Management Services (PMS) refers to professional services offered by financial institutions or portfolio managers to manage an individual’s or an entity’s investment portfolio on their behalf.

2. What key features should I look for in PMS?

Ans: When evaluating PMS, key features to consider include the provider’s investment philosophy, transparent reporting, reasonable fee structure, diversification approach, experienced track record, regulatory compliance, customization options, user-friendly technology for portfolio monitoring, and clear exit terms.

3. Are there any risks involved in PMS?

Ans: Similar to stock and fund investment risks, portfolio investment also involves risk. The type of investment vehicle determines the level of risk. Investing in small and mid-sized businesses is typically riskier than large organizations. In some circumstances, the principal amount can also be lost.

4. Who can avail Portfolio Management Services in India?

Ans: PMS in India is typically available for high-net-worth individuals, institutional investors, and entities willing to invest a significant amount, as PMS often requires a minimum investment threshold.

5. How does Portfolio Management Services work?

Ans: PMS providers assess the client’s risk tolerance, financial goals, and investment horizon to create a personalized investment portfolio. The portfolio manager then actively manages the investments on behalf of the client, making buy or sell decisions based on market conditions and the investment strategy outlined.

6. Which PMS gives the highest return?

Ans: Buoyant Capital has given the highest return of 38.52% followed by ICICI Prudential PMS 34.80% in the year 2023.

7. Which PMS is the best in India?

Ans: Motilal Oswal is the best-known PMS in India, followed by ICICI Prudential PMS, Kotak PMS, Reliance PMS, HDFC PMS, and IIFL PMS.

8. Is Portfolio Management Services worth it?

Ans: With PMS, you may customize your portfolio according to your risk tolerance and financial requirements. Moreover, they have greater investing flexibility. For this reason, PMS are more likely to provide you with better returns and outperform the markets.

9. What are the different types of Portfolio Management Services available in India?

Ans: PMS in India can be categorized into discretionary and non-discretionary services. Discretionary PMS gives the portfolio manager the authority to make investment decisions on behalf of the client without prior approval. Non-discretionary PMS involves the portfolio manager providing investment advice, but the client retains decision-making authority.

10. What is the minimum investment required for Portfolio Management Services in India?

Ans: The minimum investment amount for PMS varies among providers and may be influenced by the type of PMS (discretionary or non-discretionary). It is advisable to check with individual PMS providers for their specific requirements.

11. Can PMS investors partially withdraw the amount from the total investment done?

Ans: The withdrawal completely depends on the agreement made between the investor and portfolio manager. Moreover, it is possible to withdraw from the invested money on the portfolio management partially. Nevertheless, the portfolio’s investment value cannot fall below the relevant minimum investment amount upon such a withdrawal.

12. How are Portfolio Management Services regulated in India?

Ans: PMS in India is regulated by the Securities and Exchange Board of India (SEBI). SEBI has established guidelines and regulations to ensure transparency, fairness, and investor protection in the PMS industry.

13. Is there any agreement between the portfolio manager and the client?

Ans: Yes, both the portfolio manager and the investor client come to an agreement that carries outlines of their mutual rights and obligations regarding the management of funds or securities. The agreement must be according to Schedule IV of the SEBI (Portfolio Managers) Regulations, 1993.

14. Does the portfolio manager have SEBI approval for any Services?

Ans: No, none of the services provided by the Portfolio Manager fall under the SEBI rule. The terms and conditions specified in the disclosure document and the investor-portfolio manager agreement must be followed by the investor and done with complete confidence.

15. What fees are associated with Portfolio Management Services?

Ans: PMS providers typically charge a fee based on the assets under management (AUM) or a fixed fee structure. Additionally, there may be performance-based fees linked to the returns generated by the portfolio manager.

16. What is the tenure of investment for Portfolio Management Services?

Ans: The tenure of investment in PMS is generally flexible and can be customized based on the client’s financial goals. PMS providers may offer both short-term and long-term investment strategies.

17. Can investors monitor their Portfolio Management Services online?

Ans: Most PMS providers offer online platforms where investors can monitor their portfolios in real time. This includes accessing investment reports, performance summaries, and transaction history.

18. Is Portfolio Management Services suitable for all investors?

Ans: PMS is typically suitable for investors with a higher risk appetite and a substantial investment corpus. It is essential for investors to thoroughly understand the associated risks and conduct due diligence before opting for Portfolio Management Services.

Remember to consult with financial advisors or PMS providers directly for the most accurate and up-to-date information regarding Portfolio Management Services in India.

 

Reference links

https://nivesh.com/blog/pms/all-you-need-to-know-about-portfolio-management-services/

https://www.hdfcbank.com/personal/resources/learning-centre/invest/what-is-portfolio-management-services

https://cleartax.in/s/portfolio-management-services

https://www.indiainfoline.com/knowledge-center/mutual-funds/what-are-the-portfolio-management-services

https://tavaga.com/blog/portfolio-management-services/

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