Though there are PMS strategies available in other asset classes like Fixed Income,
Bonds, and Structured Products etc, Equity PMS remains the most popular PMS offering.
Ever since the Market watchdog, SEBI, tightened regulations in 2010, PMS as an Investment
Option has undergone lot of refinement and has found more acceptance with investors.
Can I open a PMS account ?
You can open a PMS account, if you are:
- An Individual
- A Hindu Undivided Families
- An Association of Persons
- A Limited Companies
- An NRI, Overseas Company, Firm, Society or an Overseas Trust (subject to RBI approval)
What are the different Types Of PMS ?
PMS services are offered by prominent Brokers & Asset Management Companies registered
with SEBI. Broadly there are two types of PMS:
- Discretionary PMS: In this PMS, the fund manager makes Investment Decisions
on behalf of the client and also executes them. The Portfolio Manager has power
of attorney to do so. In simple words, the investor has no say in stock selection.
- Non Discretionary:In this PMS, the fund manager gives stock tips to the client
and the decision to execute them remains solely at the discretion of the Investor.
Can I specify stocks/sectors that I want or don’t want to hold?
No, In Discretionary Portfolio Management Service, the discretion to invest primarily
lies with the portfolio manager. However, at the time of Investing, you can give
a list of securities/sectors which you do not want in your portfolio due to reasons
like conflict of interest, religious beliefs etc. We can take it to the PMS manager
to see if such arrangement can be worked out. Again this is possible if the investment
amount is higher.
PMS VS Direct Equity Portfolio Vs Mutual Funds. Which is better?
Successful Equity Investing essentially requires:
- Expertise to create a quality portfolio.
- Skill set to evaluate companies and dedication to manage.
- Ability to withstand volatility
- In-depth knowledge of Sectors, Trends & Market intelligence.
- Decision making ability to Buy/Sell based purely on fundamentals & not sentiments.
PMS’s run a concentrated Portfolio of 20-25 stocks. Each company can be given the
required dedicated time and effort and many new opportunities can be looked for
which is not possible in case of both Mutual Funds & Direct Equity Portfolio as
the number of stocks in their Portfolios are quiet high. Direct equity Investors
are often seen disappointed with the performance of their portfolios, as human emotions
of greed and fear make them commit errors. On the other hand though Mutual Fund
Investors do better than direct equity investors, they trial in performance due
to over-diversification. From the past data one can make out that mutual fund returns
have trailed PMS returns over longer tenures.
From the above points one can make an observation that a PMS portfolio can generate
a higher alpha on the Investment compared to Mutual Funds & Direct Equity Portfolio
albeit with a higher bit of risk.
What are the benefits of PMS?
- Professional Management:
- Higher flexibility in managing the Portfolio
- Better access to Information
- High chances of spotting Opportunities at early stages of Investment
- Risk Control
- Continuous Monitoring
- Periodic Reporting
An audit report will be sent to you after the end of financial year mentioning in
detail all the Transactions in the given year, Gains both Short Term/Long Term,
Expenses, Dividend, Interest Income & Portfolio Commentary.
Note: All PMS’s will have to manage their portfolio within the ambit of guidelines
set-in by SEBI. Hence there are strong risk management tools in place.
Will my Tax Liability be High ?
- No. For Equity PMS, the Tax Liability would be the same as you would be Investing
directly. However, you should consult your tax advisor on the same. The Portfolio
Manager ideally provides an audited Statement of Accounts at the end of the Financial
Year to aid the Investors in assessing his/ her tax liabilities.
Long Term/Short Term Holding Period In Equity PMS:
- Long Term: Holding period >12 Months
- Short Term: Holding period <12 Months
Can a NRI avail of the Portfolio Management Service?
The Portfolio Management Services is open for all Indian nationals, resident or
otherwise. NRIs will have to open a PIS Account as required under RBI guidelines
in order to invest in the PMS scheme.
Open a Portfolio Investment Scheme (PIS/PINS) Account:
- According to the guidelines given by RBI, an NRI can only trade or Invest in stocks
and shares in India through the Secondary Market via a designated account known
as Portfolio Investment Scheme (PIS/PINS) account on a repatriation or nonrepatriation
- For any transaction in a secondary market on repatriation basis, you need to have
an NRE bank account. On the other hand, if you want to do any transaction on a nonrepatriation
basis, you should have an NRO bank account. An NRI can open only one PIS account.
- So, if you have existing shares in your Demat account in India, you are required
to get the shares transferred to your PIS account so that if you wish to sell these
shares in future, you can do so through the PIS route and then you can close your
Can I open a PMS account with a combination of Cash and Stocks? What are the modes
through which I can make Investments in PMS?
Yes, you can open a PMS account with a combination of Cash and Stocks. The Initial
Portfolio of Securities/ Shares will be re-aligned as per the model portfolio.
Apart from cash, you can also hand over an existing portfolio of stocks, bonds or
mutual funds to a Portfolio Manager that could be revamped. However the Portfolio
Manager may at his own sole discretion sell the said existing securities in favour
of fresh investments.
Can I use my DEMAT holdings of stocks to make Investment in the PMS account?
You can use your current Securities / Shares to make Investment in PMS Account,
but these will have to be liquidated or transferred to the PMS account, the total
sale value of which should be at least Rs. 25 Lacs.
What is the process of opening a PMS Account:
When you opt for a PMS scheme, a bank account and demat account are separately opened
in your name and all Investments are made in your name. Accordingly, any income
or dividend coming out of the investment made will also be credited in your bank
account and the shares will be held in the demat account in your name.
As per the PMS agreement, the Power of Attorney for operating the bank and demat
account will be with the portfolio manager.
Can I meet my Portfolio Manager/ Investment Advisory team and discuss portfolio?
Yes, it is possible. We understand that you have Invested your hard-earned money
and therefore want all your queries are answered timely. You can anytime request
for an appointment/call and we will arrange the same with the fund management team
for discussion about portfolio spread and returns or any other query you may have
regarding your portfolio.
Can I book my profits partially any time?
Yes, you can book your profits anytime you want, provided your portfolio‘s value
does not fall below the prescribed limit of Rs. 25 Lacs, as per SEBI regulations.
To know more about which PMS Strategies have Delivered Consistent Returns and to
know more about them Click Here