what Is Portfolio Management Services (PMS), Types, Benefits
Portfolio Management Services

what Is Portfolio Management Services (PMS), Types, Benefits

Portfolio Management Services (PMS) refer to professional services offered by financial institutions or portfolio managers to manage an individual's or an institution's investment portfolio. PMS is a customized investment approach where a professional manager or a team of managers actively manage the securities in the portfolio on behalf of the client. portfolio management involves deciding how to invest money to align with personal goals, risk tolerance, and asset allocation needs. PMS solutions fall into two categories: discretionary and non-discretionary.

Discretionary Portfolio Management
  • In this approach, portfolio managers have complete control over investment decisions.
  • Clients entrust professionals to make buy and sell decisions, leveraging their expertise.
  • Suited for individuals with significant investment knowledge who are comfortable delegating decision-making.
Non-discretionary Portfolio Management:

This approach involves financial advisers who provide advice but require investor approval for execution. Investors maintain control over final decisions, with advisers offering guidance on market strategies. Appeals to those who want expert advice while retaining decision-making authority.

Considerations/Benefits for Portfolio Management Services (PMS)
1. Investment Strategies

PMS providers often adopt various investment strategies based on market conditions, economic outlook, and their expertise. Common strategies include:

Value Investing:

Seeking undervalued securities with the potential for long-term growth.

Growth Investing:

Focusing on stocks with high growth potential.

Income Generation:

Emphasizing dividend-paying stocks and income-generating securities.

Quantitative Strategies:

Using mathematical models and algorithms to make investment decisions.

2. Due Diligence and Research

Portfolio managers conduct in-depth research and analysis before making investment decisions. This includes fundamental analysis of individual stocks, economic research, and monitoring global market trends. The goal is to make informed investment choices aligned with the client's objectives.

3. Reporting and Communication

Transparency is a key feature of PMS. Clients typically receive regular reports detailing their portfolio performance, asset allocation, and any changes made to the portfolio. Regular communication with the portfolio manager allows clients to stay informed and address any concerns or questions they may have.

4. Risk Management

PMS providers employ risk management strategies to protect the portfolio from significant losses. This includes setting risk tolerance levels, diversifying the portfolio, and using hedging techniques such as options or futures contracts to mitigate market risk.

5. Minimum Investment Requirements

PMS often has a minimum investment requirement, making it more accessible to high-net-worth individuals and institutions. The minimum investment amount varies among providers and may influence the level of customization and attention provided to each client.

6. Performance Fees

PMS providers may charge a performance fee based on the returns generated for the client. This fee structure aligns the interests of the manager with the client's investment goals. However, investors should be aware of the fee structure and its impact on overall returns.

7. Regulatory Compliance

PMS providers are subject to regulatory oversight in many jurisdictions. Clients should ensure that the provider is registered with relevant financial authorities and complies with all regulatory requirements. This helps safeguard investor interests and ensures a level of professionalism and accountability.

8. Investment Horizon

PMS can cater to various investment horizons, from short-term trading to long-term wealth creation.
Clients can work with portfolio managers to align their investment horizon with the appropriate strategies.

9. Exit Strategies

PMS providers should have clear exit strategies for underperforming assets or changing market conditions. This involves regularly reviewing the portfolio and making adjustments based on the evolving market landscape.

10. Client Education

PMS providers often engage in client education, helping investors understand the investment process, market dynamics, and the rationale behind portfolio decisions. Informed clients are better equipped to make sound financial decisions. Investors considering PMS should conduct thorough due diligence, considering the provider's track record, investment philosophy, risk management practices, and fees. Additionally, open and clear communication with the portfolio manager is crucial to ensuring that the investment strategy aligns with the client's financial goals and risk tolerance.

Evaluation Criteria for PMS Providers:

Expertise: Assess the credentials and experience of the portfolio management team.
Selection Process: Understand the criteria and methodology used for strategy selection.
Unbiased Advice: Choose providers that offer impartial guidance, not favouring specific portfolio managers.
Consistency: Evaluate the historical performance of portfolios under diverse market conditions.

Why Invest through AIF & PMS Experts India
  • AIFs and PMS are managed by experienced professionals with expertise in financial markets, economics, and investment strategies. These fund managers use their knowledge to analyse market trends, economic indicators, and company performance. Their goal is to make well-informed investment decisions that align with the fund's objectives and the interests of the investors.
  • Portfolio Management Services (PMS) offer investors the opportunity to have personalized investment portfolios. This customization takes into account the investor's risk tolerance, financial goals, time horizon, and any specific preferences they may have. Fund managers work closely with clients to design portfolios that reflect their unique financial situations and investment preferences.
  • Diversification is a risk management strategy that involves spreading investments across different asset classes, sectors, and geographic regions. AIFs and PMS are structured to provide diversification, helping to mitigate the impact of poor performance in any one investment. This approach aims to balance risk and return by avoiding over-concentration in a particular area of the market.
  • The Securities and Exchange Board of India (SEBI) regulates AIFs and PMS to ensure transparency and protect the interests of investors. Compliance with SEBI regulations is crucial for the functioning of these investment vehicles. It includes disclosure norms, reporting requirements, and guidelines for the fair treatment of investors. Investors can have confidence in the regulatory oversight that governs these investment options.
  • AIF and PMS experts possess in-depth knowledge of financial markets, investment theories, and risk management strategies. Investors benefit from this expertise, gaining access to insights and analyses that may not be readily available to individual investors. This professional guidance can be valuable in making informed investment decisions.
  • AIFs and PMS often involve active management, meaning that fund managers actively monitor and adjust portfolios in response to changing market conditions. This dynamic approach allows for timely decision-making, taking advantage of opportunities and managing risks in real-time.
  • AIFs and PMS may have minimum investment requirements, making them suitable for high-net-worth individuals. This ensures that the funds are managed efficiently, with the ability to employ diverse strategies that may not be feasible with smaller investment amounts.
  • Investors can evaluate the historical performance of AIFs and PMS to assess how well the fund manager has navigated different market conditions. While past performance is not indicative of future results, a strong track record can provide investors with confidence in the manager's skill and ability to deliver consistent returns.
Expertise and Credentials

The team comprises ex-bankers with extensive experience in wealth management within the alternative sector. Their knowledge encompasses all aspects of wealth management, providing clients with comprehensive support.

Strict Selection Procedure:

A proprietary evaluation structure ensures that any strategy recommended to clients meets internal parameters.
Rigorous screening ensures the inclusion of high-quality and consistent-performing portfolios.

Unbiased Advice:

As independent collaborators, the team offers unbiased advice, free from favouritism toward specific portfolio managers. This impartiality ensures that clients receive recommendations based on their best interests.

Consistency Monitoring:

A score for consistency tracks and monitors portfolio and strategy performance, especially in volatile market conditions. This proactive approach enhances transparency and helps clients make informed decisions.

PMS Strategy:
The PMS strategy employed involves a discrete set of criteria:
  • Investment Philosophy
  • Investment Pedigree
  • Experience of Fund Managers
  • Scheme Performance
  • Track Record
  • Consistency
  • Portfolio Quality
  • Size of Assets Under Management (AUM)
  • Theme of Investment

These factors collectively contribute to a comprehensive and well-defined approach to portfolio management within the PMS framework.
In conclusion, understanding the nuances of Portfolio Management Services and considering these key aspects can empower investors to make informed decisions aligned with their financial goals and risk tolerance.