Portfolio Management Services

Portfolio management service providers advise clients on buying or selling shares, derivatives or other type of securities. Depending on the type of PMS, the manager can also buy or sell securities on behalf of the clients. An entity needs to be registered with the SEBI as a portfolio manager. An investor individually owns the securities in a PMS portfolio, unlike a mutual fund where investors only own units of the fund and not the actual securities.

Types of PMS

In a discretionary PMS, the decision to select, buy or sell stock is taken by the portfolio manager. The trades are also executed by him. But in a non-discretionary PMS, an investor can take the trading decisions advised by the portfolio manager, which are then executed by the manager. In an advisory PMS, a manager gives only investment ideas, and the trades can be executed by the investor.

Fees in a PMS

Portfolio management services either have a fixed, profit-sharing or hybrid fee structure. In a fixed-fee structure, the manager charges a set fee every quarter or on the corpus. It is levied irrespective of the returns generated by a portfolio. Then, there is the profit-sharing model, where the fee paid by an investor is a percentage of profits. This is usually a large chunk, around 20-25% of profits. A hybrid model combines both, although charges are less.

The advantages of PMS

PMS trade in a wide range of securities, including structured products, which is not available to a mutual fund. PMS regulations are less strict than MF regulations. A PMS is a more personalised investment solution; some investors may ask their portfolio managers to allocate a large part of corpus to non-equity products like fixed income, gold, etc.