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What is Portfolio Management Services (PMS)?

A Portfolio Management Service (PMS) is a service which provides professional management of investments to create wealth. It aims to cater to the investment needs of individuals or entities with high net worth value by providing them with investment solutions.

Who is a Portfolio Manager?

A Portfolio Manager is a body corporate, which, pursuant to a contract with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary Portfolio Manager or otherwise) the management or administration of a portfolio of securities or funds of the client.

Why Portfolio Management Services (PMS)?

  • Advantage of equities as an asset class
  • Solutions customized to needs of HNIs and UHNIs
  • Personalized attention
  • Portfolio Managers take buy / sell decisions on behalf of, but in consultation with a client
  • Portfolio Managers regularly interact with clients to update them on portfolio strategy, performance, and market outlook

What is the difference between discretionary portfolio management service and non-discretionary portfolio management service?

In discretionary portfolio management service, the Portfolio Manager individually and independently manages the funds and securities of each client in accordance with the needs of the client.

Under the non-discretionary portfolio management service, the Portfolio Manager manages the funds in accordance with the directions of the client.

Who is an ideal PMS investor?

The investment solutions provided by PMS cater to a niche segment of clients. The clients can be individuals or institutions with a high net worth.

The offerings are usually ideal for investors who are:

  • Looking to invest in asset classes like equity, fixed income, structured products etc.
  • Desire personalised investment solutions
  • Desire long-term wealth creation
  • Appreciate a high level of service

Who can sign up for PMS?

The following investors are eligible to invest through PMS:

  • Resident Individuals
  • Hindu Undivided Families (HUF)
  • Body Corporates (Private / Public)
  • Registered Trusts
  • Non-Resident Indians (NRI)*
  • Partnership Firms or any other eligible investor

* Subject to RBI approval

How is PMS different from a Mutual Fund?

  • Management

    PMS

    Provides ongoing, personalised access to professional money management services

    Mutual Fund

    Provides access to professional money management services

  • Customisation

    PMS

    Portfolio can be tailored to address each investor's specific needs

    Mutual Fund

    Portfolio structured to meet the fund's stated investment objectives

  • Ownership

    PMS

    Investors directly own the individual securities in their portfolio

    Mutual Fund

    The trustee owns shares of the fund and cannot influence buy and sell decisions

  • Minimums

    PMS

    Significantly higher minimum investments than mutual funds. Minimum investment - ₹50 lakhs

    Mutual Fund

    Minimum investment - ₹5,000

  • Flexibility

    PMS

    PMS products can be customised to meet special customer requirements

    Mutual Fund

    No customisation possible

What fees can a Portfolio Manager charge from its clients for the services rendered by him?

SEBI (Portfolio Managers) Regulations, 2020 provide that the Portfolio Manager shall charge a fee as per the agreement with the client for rendering portfolio management services. However, no upfront fees shall be charged by the Portfolio Manager directly or indirectly to the clients.

The agreement between the Portfolio Manager and the client shall, inter-alia, also include the quantum and the manner of fees payable by the client for each activity for which service is rendered by the Portfolio Manager directly or indirectly.

Whether the funds of clients availing discretionary PMS may be invested in unlisted bonds, which are traded over the counter but settled and reported to the Stock Exchanges?

No.

What is the minimum value of funds or securities that can be accepted by the Portfolio Manager from the client while opening the PMS account?

The Portfolio Manager is required to accept minimum INR 50 Lacs or securities having a minimum worth of INR 50 Lacs from the client.

Can NRIs invest in the PMS?

Yes, NRIs can invest in the PMS through the NRE or NRO accounts. There are some additional compliance/documentation requirements for NRI clients. Our relationship manager will help the NRI client with this documentation.

Clients on-boarded by the Portfolio Manager prior to January 21, 2020 were required to bring in minimum of INR 25 Lacs as their initial investment. What is the minimum amount that may be further invested (top-up) by such clients on or after January 21, 2020?

Clients of Portfolio Managers on-boarded before January 21, 2020 shall, in case of any top-up, comply with the requirement of new minimum investment amount and top up their accounts to minimum INR 50 Lacs.

Is Partial withdrawal of Portfolio permitted, for the existing clients of Portfolio Managers?

The client may withdraw partial amounts from his portfolio, in accordance with the terms of the agreement between the client and the Portfolio Manager. However, the value of investment in the portfolio after such withdrawal shall not be less than the applicable minimum investment amount.

Is the client required to top up his account if the portfolio value falls below the minimum investment amount as provided in the SEBI (Portfolio Managers) Regulations, 2020 as a result of valuation of portfolio?

No.

What kind of reports can the client expect from the Portfolio Manager?

The Portfolio Manager shall furnish periodically a report to the client, as per the agreement, but not exceeding a period of three months and such report shall contain the following details, namely: -

(a) the composition and the value of the portfolio, description of securities and goods, number of securities, value of each security held in the portfolio, units of goods, value of goods, cash balance and aggregate value of the portfolio as on the date of report;

(b) transactions undertaken during the period of report including date of transaction and details of purchases and sales;

(c) beneficial interest received during that period in the form of interest, dividend, bonus shares, rights shares, etc;

(d) expenses incurred in managing the portfolio of the client;

(e) details of risk foreseen by the Portfolio Manager and the risk relating to the securities recommended by the Portfolio Manager for investment or disinvestment;

(f) default in payment of coupons or any other default in payments in the underlying debt security and downgrading to default rating by the rating agencies, if any;

(g) details of commission paid to distributor(s) for the particular client.

How frequently will I get updates on my PMS account performance?

You will receive a quarterly update on your PMS account Performance. There is also a web portal where you can login and view your account performance and NAV.

What is the disclosure mechanism of the Portfolio Managers to their clients?

The Portfolio Manager provides to the client the Disclosure Document prior to entering into an agreement with the client.

The Disclosure Document contains the quantum and manner of payment of fees payable by the client for each activity, portfolio risks, complete disclosures in respect of transactions with related parties, the performance of the Portfolio Manager and the financial performance of the portfolio manager for the immediately preceding three years.

What are the rules governing services of a Portfolio Manager?

The services of a Portfolio Manager are governed by the agreement between the portfolio manager and the investor. The agreement should cover the minimum details as specified in the SEBI Portfolio Manager Regulations. However, additional requirements can be specified by the Portfolio Manager in the agreement with the client. Hence, an investor is advised to read the agreement carefully before signing it.

Can a Portfolio Manager impose a lock-in on the investor?

Portfolio Managers cannot impose a lock-in on the investment of their clients. However, a Portfolio Manager can charge applicable exit fees from the client for early exit, as laid down in the agreement subject to provision of SEBI Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/26.

Can a Portfolio Manager offer indicative or guaranteed returns?

No, we do not guarantee or indicate any returns on the portfolios managed by us. It has to be distinctly understood that investing in equities is a risky proposition and there exists a risk to the principal amount invested. Further, SEBI guidelines prohibits the portfolio manager from guaranteeing or indicating a return, either directly or obliquely.

What is the tax treatment in PMS investment?

The tax liability of a PMS investor would remain the same as if the investor is accessing the capital market directly. However, the investor should consult his / her tax advisor for the same. The Portfolio Manager ideally provides audited statement of accounts at the end of the financial year to aid the investor in assessing his / her tax liabilities.

Are there risks associated with PMS investments?

Yes. All investments involve a certain amount of risk, including the possible erosion of the principal amount invested, which varies depending on the security selected.

Where can an investor look out for information on Portfolio Managers?

Investors can log on to the website of SEBI www.sebi.gov.in for information on SEBI regulations and circulars pertaining to Portfolio Managers. Addresses of the registered Portfolio Managers are also available on the SEBI website. Information on monthly reports submitted by Portfolio Managers to SEBI can be accessed at https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doPmr=yes.

Where can an investor file their complaints?

Investors would find the name, address and telephone number of the investor relation officer of the Portfolio Manager (who attends to the investor queries and complaints) in the Disclosure Document. The grievance redressal and dispute mechanism is also mentioned in the Disclosure Document. In case of non-redressal of the complaint by the Portfolio Manager, investors can approach SEBI for redressal of their complaints. Investors may lodge their complaints through SCORES (SEBI Complaints Redress System - https://scores.gov.in/scores/Welcome.html) or by sending their complaints on the address given below.

Office of Investor Assistance and Education,
Securities and Exchange Board of India, SEBI
Bhavan II
Plot No. C7, 'G' Block,
Bandra-Kurla Complex, Bandra (E),
Mumbai - 400 051