Portfolio Management Service is an art of making decisions about investment mix and policy to match their investments to objectives, strategically allocate assets and to mitigate risk. It is an attempt to maximize return for a given appetite of risk. PMS runs a more concentrated portfolio of 15-20 stocks.
They can either be Passive-simply tracking the index or Active-aim to beat the market returnby actively managing the fund.
A Portfolio Management Service can be a Discretionary PMS allowing the fund manager to take decisions without the client’s consent or can be a Non-Discretionary PMS wherein the funds are managed in accordance with the directions of the client and the client takes all the investment decisions.
Assets managed by portfolio managers has doubled since 2014 and the total AUM under Discretionary PMS is INR 11,725b & INR 924b underNon-DiscretionaryPMS. We here are offering MOAMC, ASK & Invesco discretionary PMS which relives the investor from monitoring all hassles along with benefits like regular reviews, strong risk management flexibility and makes it an ideal avenue for high net worth investors.
Direct equity has been favourable for a small set of people. The set of stocks must have outperformed the index during a bullish phase but the investors have often burnt their fingers in a bearish phase. The dynamism of equity investment comes with a risk. Even if the choice of stocks gives positive returns, if the allocation isn’t adequate it can drown the entire portfolio’s return.
A Mutual Fund on the other hand offers diversification but with the risk of dilution by investing in huge no number of stocks often going up to 50-60 stocks. However, it gets impacted by the actions of other investors and has higher restrictions due to more of retail investors. It creates a single macro portfolio and all fund holders just get a share of that and a particular allocation in a stock can’t be more than 10%.
So, Portfolio Management Services (PMS) is a perfect blend of Mutual Fund and Direct Equity portfolio by giving a concentrated portfolio of 15-20 stocks with lesser risk of dilution. It is built by giving adequate allocations to stocks as per the theme of the portfolio and also rebalancing it as need arises. Here model portfolios are created for different investors with different risk appetites & objectives. Allocations in a portfolio have no such restrictions of allocations. Portfolio Management Service (PMS) is a platform to provide professional management along with the demat account of stocks.
Portfolio Manangement Sservice offers qualified and experienced portfolio managers backed by a research team manage portfolios on behalf of the clients. Apart from managing the portfolio, managing fund flows is a significant activity on a daily basis. Tracking of stocks on regular basis is missing in retail investors.
This adds value to your portfolio because retail investors build portfolios on tips & popularity of stocks instead of conviction present with fund managers. Professionalism comprises of focusing on what to buy and how much to buy strategically. There is not much importance given to break up of sector, stocks and allocation of amount by retail investors. This leads to poor returns.
The fund managers hold on to a stock for a longer period of time and get away from unwanted market buzz. For example, holding on to stocks like Bajaj Finance which was 33.33 in January 2010 is currently trading at 2697.90 (as on 31st July 2018). Also, in spite of having much volatility as much as 46% over 23rd and 24th of October, the fund manager held on to Punjab National Bank at that point in time.
Major benefits of having a professional look after investments include proper financial planning, diversification strategy, timely stock market information, recommendations, research and much more.
There are certain limitations in direct equity simply because there might not be the required research or familiarity with certain companies or sectors but investing in a portfolio ensures that the risk is well spread by diversification across stocks and sectors.
Portfolios ensure stabilised returns because otherwise it entails a greater risk. Portfolios give a structural investment opportunity to investors by creating a model set of approximately 15-20 stocks.
o Default Risk: There are chances of companies defaulting in the equity market but investing through a PMS involves a rigorous process of selecting stocks which tries to mitigate such a risk.
o Volatility Risk: Diversification across stocks and sectors decreases the market volatility helping the investors achieve consistent and sustainable returns.
o Over diversification risk: Sound fund managers build a portfolio between concentration risk and over diversification risk.
o Longer time period
o Away from unwanted market buzz
o Tracking on a daily basis
o Stocks based on conviction
o Focus of allocation, sector/stock break up