PMS

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Portfolio Management Services

PMS or Portfolio Management Service are investment vehicles where qualified and experienced portfolio managers offer investment services to investors.

Portfolio managers invest in equities, debt, etc on behalf of the investors as per structure of the PMS scheme.

PMS are of two types

Discretionary In a discretionary portfolio, an investor provides the PMS manager the authority to make decisions on investors behalf.

Non-discretionary In this type of portfolio, the PMS managers suggest investment ideas to their clients.

Minimum investment required to avail of the PMS scheme is about 50lacs. This can be in form of stocks or cheque or combination. This is at discretion of PMS manager.

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Portfolio Management May Be Either Passive Or Active In Nature.

  • Passive management is a set-it-and-forget-it long-term strategy. It may involve investing in one or more exchange-traded (ETF) index funds. This is commonly referred to as indexing or index investing. Those who build Indexed portfolios may use modern portfolio theory (MPT) to help optimize the mix.
  • Active management involves attempting to beat the performance of an index by actively buying and selling individual stocks and other assets. Closed-end funds are generally actively managed. Active managers may use any of a wide range of quantitative or qualitative models to aid in their evaluations of potential investments.

Key Takeaways

  • Portfolio management involves building and overseeing a selection of investments that will meet the long-term financial goals and risk tolerance of an investor.
  • Active portfolio management requires strategically buying and selling stocks and other assets in an effort to beat the broader market.
  • Passive portfolio management seeks to match the returns of the market by mimicking the makeup of a particular index or indexes.

Advantages of PMS

  • Professional management by well established, qualified & experienced portfolio management teams.
  • Diversification in terms of management style, specific schemes etc
  • Better risk control.
  • Portfolio can be customised.
  • Governed by regulations.
  • Transparent PMS managers need to provide investors with holding statements, revenue statements, expenses etc.
  • Transparent fee structure.

These PMS schemes can be considered by HNI & UHNI investors.