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Overview Of Portfolio Management Services
Portfolio Management Services (PMS) has emerged as a sophisticated investment vehicle in India, catering to high-net-worth individuals (HNIs) seeking tailored investment solutions. PMS offers a bespoke approach to wealth management, where portfolios can be customised to meet specific financial objectives, risk tolerance, and investment horizons of the investor.
In India, PMS investment solutions are offered by SEBI-registered portfolio managers, and PMS is regarded as an HNI product as the minimum investment amount required is Rs. 50 Lakh. PMS strategies can provide more personalised management of investments in equities, fixed income, and other securities, unlike mutual funds, which invest in a diversified portfolio that is common to all investors. The essence of PMS lies in its ability to offer increased flexibility and individualised strategies managed by experienced portfolio managers.
Types Of PMS
Discretionary
Discretionary PMS (Portfolio Management Services) is an arrangement where a portfolio manager has the full authority to make investment decisions on behalf of the client, without needing prior approval for each transaction. This service is ideal for investors who want professional management and prefer minimal involvement in day-to-day investment decisions. The manager handles everything from selecting investments to executing trades, based on the investor’s goals and risk profile.
Non - Discretionary
Non-discretionary PMS means a portfolio manager provides investment recommendations and advice, but the investor gives the final approval for all buy/sell transactions. This service is for investors who want professional guidance and research but want to retain full control over their portfolio decisions. The manager acts as an advisor, and the client must give explicit approval before any trades are executed.
Who Should Invest In PMS?
SEBI mandates a minimum investment of Rs. 50 lakh for Portfolio Management Services.
High-Net-Worth Individuals (HNIs)
PMS is ideal for investors with substantial investable assets seeking a personalised portfolio management approach as the minimum investment threshold is high.
Sophisticated Investors
Those who have a deeper understanding of the financial markets and prefer a tailored investment strategy over a standardised one can look at adding PMS to their portfolio.
Long-Term Investors
PMS is well-suited for individuals with a long-term investment horizon, as most of the strategies are designed to achieve growth.
Why Invest In PMS?
Customisation
Mutual funds inherently offer diversification by investing in a basket of assets. This reduces risk compared to putting all your eggs in one basket (individual stocks).
Flexibility
Unlike mutual funds, PMS offers greater flexibility in terms of asset allocation, investment choices and decision-making to respond to market changes and opportunities
Potential for Higher Returns
Given the active management approach and flexibility, PMS can potentially deliver higher returns
Transparency
Mutual funds are regulated by the SEBI, ensuring transparency in operations and disclosures.