Portfolio management services is called in short by PMS, the traction towards PMS is increasing day by day for the last 3 years, However there is misconception or myths that investment into PMS holds high risk than Mutual fund or any other Equity investments. As the underlying asset base of any Equity related investment, whether it is mutual fund, direct equity investment or PMS, it’s the same Equity / Share which is managed differently in all the cases.
In Recent days investments into PMS has grabbed a lot of attention. While equities may seem to be risky on a short-term basis, the degree of risk reduces when you have a long-term approach.
Portfolio Management Services has qualified and experienced portfolio managers backed by a strong professional research team. SEBI has stringent regulations or mandate for PMS fund managers and Asset Management Companies (AMC) in terms experience of fund managers and compliance part of running an AMC.
As the markets are dynamic in nature it needs active management of tracking the portfolio stocks at regular intervals. It could be tracking fundamentals of the Company, Quarterly earnings, the Global and local Events which they feel it will affect the portfolio holdings. They will be managing portfolios on behalf of clients instead of the clients managing it themselves.
Portfolio Management Services provide tailor made professional services to meet the investment objectives of various investors .
In this, the service providers (AMC) have different model portfolios such as Large-cap, Mid-cap, Multicap, Small cap & even thematic . Investors can choose depending upon their requirements and risk Appetite. Many PMS providers offer standardized portfolios, some offer investments which can be tailored to clients' goals. For eg, a client may want to invest a large amount in a single stock or large cap category . This is not possible in mutual funds, as they cannot hold more than 10% net asset value in a single stock. While this spreads risk, a big disadvantage is that mutual funds cannot hold a big stake in a company even if it is a very good investment. PMS do not have this limitation. The Portfolio manager builds and manages each portfolio keeping in mind the strategy selected and the timing of the investment.
PMS Investors will directly own the portfolio stocks in their DP. Every transaction is intimated to the investor. PMS is transparent in terms of expense ratios with 24/7 online access to investors. Unlike mutual fund managers, PMS managers are directly accountable to the client, who can seek clarifications, especially in the discretionary portfolio.
Unlike Mutual fund investors, PMS investors are access to several different reports prescribed by SEBI. Online Web access and tools has been provided by all AMC to their PMS investors to track the PMS investments, Performance and transactions.
In general, most of the PMS strategies are having concentrated portfolios, the number of holdings will be in range between 15-25 stocks. Since the portfolios are highly concentrated in nature AMC will have separate , strong and Active risk management system in place to manage RISK effectively. Asset Management Companies ( AMC) ensures that the portfolios are constantly monitored and periodic changes are made to optimize the results. A professional research team is always in action and responsible for providing real time information about the portfolio holdings to portfolio manager to make necessary changes to manage it more efficiently.
PMS can be more aggressive and has the potential to generate superior returns. Portfolio managers may choose to have meaningful exposure to such companies as well as hold on as long as they are delivering growth by adding value and superior returns.
Unlike Mutual funds, PMS fund managers can even take aggressive cash calls when he is not comfortable about current market valuations, since there is no cash restrictions fund manager can sell most of the portfolio in bad market conditioner he can do staggered investment to construct the complete portfolio in volatile markets., Which eventually helps PMS fund managers to generate superior returns to their investors.
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