Evolution Of Portfolio Management Services In India

PMS has grown significantly over the last 5 years by over 400 per cent

Evolution Of Portfolio Management Services In India
PMS can be a good option to look for beyond equity mutual fund
Himali Patel - 16 March 2021

Viraj Mehta, MD and Fund Manager of Equirus PMS in an interview with Himali Patel explains the growth journey of PMS in the last five years. Edited excerpts.

What is PMS and how it has evolved in India so far?

PMS is a portfolio management service targeted at HNI (High Networth Individual) or investors who have a high-risk appetite, and the minimum ticket size of the investment required in PMS is Rs 50 lakh – as increased by the Sebi (Securities and Exchange Board of India) recently.

A lot of investors want to have a direct equity portfolio and may want high returns by taking a huge risk. Many even manage their portfolios, but not everyone might have all the expertise needed to manage the stock portfolio. For such an investor, PMS can be a good option to look for beyond equity mutual funds.

The importance of PMS is from two major objectives i.e., investors who may wish to avail the services of a Portfolio Manager to manage direct holdings of equity or fixed income, or clients who are looking at specific thematic exposure which can be positioned as satellite strategies in their overall financial portfolios.

What is the current fee structure of PMS ? How much stocks, MF's, constitute in any basic PMS are offered?

We offer a 2 fee structure. The majority of our money is at 1 per cent fixed management fees with 20 per cent performance fees above the 10 per cent hurdle rate. We also offer 2.5 per cent fixed management fees.

What are the rules that changed in PMS by Sebi last year? Do you think it will add more transparency to the PMS products?

Sebi has done a great job of bringing transparency by following standardised NAV (Net Asset Value) based returns for all PMS. Also, the details of the sharing distribution fees are an extremely welcome step. As per the Sebi, the portfolio managers are required to invest funds of their clients in the securities listed and traded only on a recognised stock exchange, money market instruments, units of mutual funds, and other securities as specified by the board from time to time.

Besides, the portfolio managers have to invest in units of mutual funds through direct plans only and should not charge any distribution fees to the client. Further, the board has also barred the portfolio managers to not invest clients funds in derivatives.

How has been the growth of PMS in the last five years and Sebi's role in promoting PMS?

PMS has grown significantly over the last 5 years by over 400 per cent. Transparency at the PMS level, higher returns, and choice of fee structure has contributed to the same.


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