Portfolio Management Service is gaining momentum during this bull marketplace phase. It is coupled amongst the number of tedious existent estate marketplace in addition to gold. Here I am trying to collate the most mutual questions that comes to investors planning for PMS.
1. What is Portfolio Management Service?
Portfolio Management Service is a professional person service offered to wealthy investors to run into their investments objectives. The Investment solutions provided past times PMS cater to a niche segment of elite customers. The clients are unremarkably Individuals or Institutions entities amongst high cyberspace worth. Data from the Securities in addition to Exchange Board of Republic of Republic of India (Sebi) shows that in that location are nearly 1880registered portfolio managers at present, downward from 267 inwards 2012. But barely 100 firms would hold upwardly active, amongst a large chunk of the trouble concern existence concentrated inwards the hands of the top 8-12 fund managers. 90% of total AUM is concentrated inwards the hands of top 10-15 fund managers.
2. What is the PMS history inwards India?
Portfolio Management Service had a large success floor earlier the 2008 marketplace crash but faced accusations of misuse. Many of the PMS providers were non registered in addition to indulged inwards heavy trading which resulted inwards heavy loss for the customers. After that, the Securities in addition to Exchange Board of Republic of Republic of India introduced stringent regulations. Among other things, it raised the minimum investment boundary from Rs v lakh to Rs 25 lakh. It also banned pooling of accounts of unlike investors. Then in i lawsuit again PMS gained momentum later 2013 in addition to at in i lawsuit to a greater extent than elite customers are moving to PMS due to its consistent performance.
3. Who is a Portfolio Manager?
As per Sebi regulations, a portfolio managing director is a soul who advises, directs or undertakes direction or direction of a portfolio of securities or funds. All the portfolio managers autumn nether the ambit of Sebi Portfolio Managers Regulations, 1993. The minimum ticket size for an investor to avail of PMS is Rs 25 lakh. Portfolio Manager is whatsoever soul or a a trunk corporate who pursuant to a contract or organisation amongst a client, advises or directs or undertakes on behalf of the client (whether equally a discretionary portfolio managing director or otherwise) the direction or direction of a portfolio of securities or the funds of the client. So it is basically a service offered to a customer, for which the portfolio managing director charges a fee, in addition to it is non whatsoever partnership that he gets into amongst the client. Though in that location are lucre sharing plans, in that location is no loss sharing plans :)
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4. What is the minimum in addition to maximum boundary for investing inwards PMS?
The minimum ticket size of the portfolio nosotros offering for is INR 25 lacs. There is no upper boundary on the amount y'all tin move invest.
5. What is discretionary PMS?
In discretionary PMS, the pick in addition to timing of the investment decisions residue amongst the fund manager. Most of the pop PMS providers conduct maintain major portion of their AUM inwards this category equally Portfolio Managers instruct maximum flexibility in addition to liberty to select the portfolio.
6. What is non-discretionary PMS?
In non-discretionary PMS, the portfolio managing director gives investment in addition to the client takes the determination on pick in addition to timing. The portfolio managing director executes the merchandise on behalf of the client.
7. What is advisory PMS?
In advisory PMS, the portfolio managing director gets paid exclusively for the investment advice. The concluding determination in addition to execution nigh investments are taken past times the client on his own.
8. Can PMS invest inwards IPOs?
Yes. Portfolio Manager has the pick to invest inwards IPOs.
9. Can PMS perform Day Trading?
SEBI forbids whatsoever solar daytime trading activity past times Portfolio Managers.
10. Can PMS invest inwards Derivatives (Futures/Options) segment?
Under SEBI guidelines, a Portfolio Manager is allowed to invest inwards the Derivatives Segment exclusively to the extent of the value of the portfolio. My advise is to verbally banking concern check in addition to confirm on this amongst your Portfolio Manager.
11. Can Client partly or fully withdraw coin from PMS account?
Yes. It is a uncomplicated procedure of informing your Portfolio Manager through a formal communication channel in addition to client should instruct the coin dorsum inside 3-5 working days. The conduct withdraw maintain of for partial withdrawal is your portfolio‘s value should non autumn below the prescribed boundary of Rs. 25 Lacs, equally per SEBI regulations. My advise is to verbally banking concern check in addition to confirm on this amongst your Portfolio Manager.
12. Is investment nether PMS gamble free?
As per SEBI regulations governing Portfolio Management Services inwards India, neither working capital missive of the alphabet nor returns tin move hold upwardly guaranteed. But in that location are PMS which gives consistent 30% inwards a higher house CAGR for the past times 5-6 years. Keep inwards withdraw heed that past times functioning is non indicator for future.
13. Can a NRI avail of the Portfolio Management Service?
The Portfolio Management Services is opened upwardly for all Indian nationals, resident or otherwise. NRIs volition conduct maintain to opened upwardly a PIS Account equally required nether RBI guidelines inwards monastic enjoin to invest inwards the PMS scheme. In fact, PMS seems to hold upwardly practiced choice to wealthy NRIs equally straight percentage trading fees are unremarkably higher for them.
14. Who tin move opened upwardly a PMS trouble concern human relationship inwards India?
A PMS trouble concern human relationship cn hold upwardly opened past times below individuals or categories
1. An Individual
2. H5N1 Hindu Undivided Families
3. An Association of Persons
4. H5N1 Limited Companies
5. An NRI, overseas company, firm, social club or an overseas trust (subject to RBI approval)
1. An Individual
2. H5N1 Hindu Undivided Families
3. An Association of Persons
4. H5N1 Limited Companies
5. An NRI, overseas company, firm, social club or an overseas trust (subject to RBI approval)
15. Is top-up facility available for PMS?
The reply is yep for most of the PMS services. My advise is to verbally banking concern check in addition to confirm on this amongst your Portfolio Manager.
16. What is the fee construction for PMS?
The fee construction for portfolio direction services is to a greater extent than oftentimes than non flexible inwards nature. Portfolio Managers unremarkably render 2-3 options inwards which client tin move select according to his/her trading ideology in addition to gamble appetite. Basically in that location are iii types of fee construction equally given below.
1. Entry load: PMS products conduct maintain an choice of charging the investor an entry charge at the fourth dimension of purchasing the PMS.
2. Fixed direction fees: In this type of fee structure, the portfolio managing director levies a fixed accuse which may vary betwixt unlike products. It is usually charged on a quarterly footing in addition to tin move also hold upwardly charged annually.
3. Profit sharing/performance linked charges: In this type of structure, along amongst a fixed fee, the portfolio managing director charges a for sure amount/percentage of profits over in addition to inwards a higher house the stipulated fund return. The fund managing director tin move claim a for sure percent of lucre over in addition to inwards a higher house a pre-determined hurdle charge per unit of measurement (say if the render is above 10% or 20%). In lucre sharing PMS, the percent of fixed fee is usually lower.
The method of charging is even so decided at the inception in addition to documented inwards the agreement. In add-on to the above, all charges linked to equity investments similar custodian fees, demat trouble concern human relationship opening charges in addition to transaction brokerage is chargeable to the client.
1. Entry load: PMS products conduct maintain an choice of charging the investor an entry charge at the fourth dimension of purchasing the PMS.
2. Fixed direction fees: In this type of fee structure, the portfolio managing director levies a fixed accuse which may vary betwixt unlike products. It is usually charged on a quarterly footing in addition to tin move also hold upwardly charged annually.
3. Profit sharing/performance linked charges: In this type of structure, along amongst a fixed fee, the portfolio managing director charges a for sure amount/percentage of profits over in addition to inwards a higher house the stipulated fund return. The fund managing director tin move claim a for sure percent of lucre over in addition to inwards a higher house a pre-determined hurdle charge per unit of measurement (say if the render is above 10% or 20%). In lucre sharing PMS, the percent of fixed fee is usually lower.
The method of charging is even so decided at the inception in addition to documented inwards the agreement. In add-on to the above, all charges linked to equity investments similar custodian fees, demat trouble concern human relationship opening charges in addition to transaction brokerage is chargeable to the client.
17. What is high water-mark regulation past times SEBI?
Profit sharing / performance related fees are usually charged by portfolio managers upon exceeding a hurdle charge per unit of measurement or benchmark as specified in the agreement. However there is no uniformity in practice on how the profit/performance of the portfolio computed. It is advised that, henceforth, profit/performance shall hold upwardly computed on the footing of high H2O grade regulation over the life of the investment, for charging of performance/profit sharing fee.
High Water Mark Principle: High Water Mark shall be the highest value that the portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be the value on the date when performance fees are charged. For the job of charging functioning fee, the frequency shall not be less than quarterly.
The portfolio manager shall charge functioning based fee only on increase in portfolio value in excess of the previously achieved high H2O mark.
Illustration:
Consider that frequency of charging of functioning fees is annual. A client’s initial contribution is Rs.25,00,000 which then rises to Rs. 27,00,000 in its first twelvemonth ; a performance fee/profit sharing would be payable on the Rs.2,00,000 return. In the next year the portfolio value drops to Rs. 26,00,000 so no functioning fee would be payable.
The portfolio manager shall charge functioning based fee only on increase in portfolio value in excess of the previously achieved high H2O mark.
Illustration:
Consider that frequency of charging of functioning fees is annual. A client’s initial contribution is Rs.25,00,000 which then rises to Rs. 27,00,000 in its first twelvemonth ; a performance fee/profit sharing would be payable on the Rs.2,00,000 return. In the next year the portfolio value drops to Rs. 26,00,000 so no functioning fee would be payable.
If in the third year the Portfolio rises to Rs.28,00,000, a functioning fee/profit sharing would hold upwardly payable exclusively on the Rs 1,00,000 lucre which is portfolio value in excess of the previously achieved high H2O grade of Rs.27 ,00,000, rather than on the total render during that twelvemonth from Rs.26 ,00,000 to Rs.28,00,000
18. What nigh my revenue enhancement liability?
In PMS in that location are iii types of incomes. You conduct maintain to pay according to the category mentioned below.
- Short term gains: Profits realised on sale of investments inside i year; taxed at 15%.
- Long term gains: Profits realised on sale of investments later i year; revenue enhancement free.
- Dividends: Tax gratis at the hands of investors upwardly to Rs. 10 Lakhs.
19. How tin move I runway my investments?
Usually PMS providers update customers amongst information inwards next ways:
- Daily reporting past times e-mail/ Weekly difficult re-create option
- Complete pic on your investment though website
- Audited, comprehensive year-end study to facilitate revenue enhancement payments
- Access to human relationship managing director or investment tea
- Access to inquiry notes generated by in-house team
20. Is in that location whatsoever revenue enhancement benefits for PMS similar mutual funds?
No. There is no revenue enhancement produce goodness for PMS.
21. How much is the AUM nether PMS inwards India?
As per Dec 2016, the total AUM nether PMS inwards INdia is ₹11.74 lakh crore equally at November-end. According to SEBI data, portfolio managers handled assets worth over ₹9.06 lakh crore for discretionary services, equally good over ₹1.97 lakh crore for advisory services in addition to about other ₹69,760 crore for non-discretionary investments. Of the total assets managed past times such managers, nigh ₹8.1 lakh crore was contributed past times Employee Provident Fund Organisation (EPFO), according to SEBI data.
22. Most Important Question: Should I invest inwards PMS?
This concluding inquiry is non an slow i to answer. It is completely dependent on your gamble profile. But I would propose investment via PMS exclusively if
1. You are a wealthy soul who has rigid fiscal background in addition to mindset to conduct maintain a hitting of 50% at-least during behave marketplace cycles. Believe me, during tech bubble inwards 1999, the United States of America mighty Cisco declined past times 86%, lost a large portion of their marketplace capitalization. You should conduct maintain plenty fiscal back upwardly to overcome a behave market.
2. You conduct maintain plenty patience to conduct maintain the discussion of your fund managing director during bad times in addition to conduct maintain religious belief amongst PM direction team.
3. Your self trading in addition to investment CARG is agency below the average PMS returns of top fund managers.
4. You conduct maintain no fourth dimension or involvement to follow your stocks in addition to requires a professional person help.
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