Portfolio Management Services account is an investment portfolio in Stocks, Debt and fixed income products managed by a professional money manager, that can potentially be tailored to meet specific investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique. As per SEBI guidelines, only those entities who are registered with SEBI for providing PMS services can offer PMS to clients. There is no separate certification required for selling any PMS product. So this is case where mis-selling can happen. As per the SEBI guidelines, the minimum investment required to open a PMS account is Rs. 5 Lacs. However, different providers have different minimum balance requirements for different products. For Eg Birla AMC PMS is having min amount requirement of Rs. 25 lacs for a product. Similarly HSBC AMC is having minimum requirement of 50 lacs for their PMS and Reliance is having min requirement of Rs. 1 Crore. In India Portfolio Management Services are also provided by equity broking firms & wealth management services.
1. Discretionary PMS
Where the investment is at discretion of the fund manager & client has no intervention in the investment process.
2. Non-Discretionary PMS
Under this service, the portfolio manager only suggests the investment ideas. The choice as well as the timings of the investment decisions rest solely with the investor. However the execution of the trade is done by the portfolio manager.
There are two ways in which an investor can invest in a Portfolio Management Services:
1. Through Cheque payment
2. Through transferring existing shares held by the customer to the PMS account. The Value of the portfolio transferred should be above the minimum investment criteria.
Each PMS account is unique and the valuation and portfolio of each account may differ from one another. There is no NAV for a PMS scheme; however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Each PMS account is unique from one another. Every PMS scheme has a model portfolio and all the investments for a particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme. However the portfolio may differ from investor to investor. This is because of:
1. Entry of investors at different time.
2. Difference in amount of investments by the investors
3. Redemptions/additional purchase done by investor
4. Market scenario – Eg If the model portfolio has investment in Infosys, and the current view of the Fund Manager on Infosys is “HOLD”(and not “BUY”), a new investor may not have Infosys in his portfolio.