4 Must Know Things About PMS

  Author: Kundan Kishore

When you have made various investments and have an investment portfolio, you might like to consider investing higher return investments. It is then that you can consider signing for Portfolio Management Service (PMS). These are offered by various financial services organisations and banks. As you try and understand more about PMS, here are four things about PMS that you must know.

Types of PMS There are broadly two types of portfolio management services (PMS): discretionary and non-discretionary. In case of discretionary PMS, investors give their money to the PMS provider and the dedicated fund manager invests money on his own. The investment decisions are at the discretion of the fund manager. On the other hand, in a non-discretionary PMS, the investment decisions are taken by the investor and the fund manager is only acting on behalf of the investor.

Minimum investment criteria To avail of a PMS, you need to invest a minimum amount which is typically Rs 25 lakh and above.

Charges For the services of portfolio management, you need to pay a charge. Before you sign up for a PMS, this is a very key area that you need to look into. The charges could be a percentage of the portfolio size, a profit sharing model or both.

Performance Along with charges, this is one of the most important areas that require investor attention. The ultimate goal of investing PMS is better returns than market. Before signing up for a PMS, ensure that you understand the way in which performance of the PMS would be communicated to you and what they would mean. You also need to know how the PMS has fared in different market conditions.

How to evaluate whether PMS has done well As per Securities and Exchange Board of Indian guidelines, portfolio managers are required to send the performance report of PMS to investors half yearly. You will need to check periodically how your PMS is faring.

Look at broad market returns such as BSE-Sensex and NSE-Nifty. You may also look at the other benchmark which is closely related to your PMS Scheme. For instance, you have chosen mid cap oriented PMS, you may like to look at indices such as BSE-Mid Cap, Nifty–Mid cap index. This will help you evaluate the performance of your portfolio manager more accurately.

While there might be a whole lot more for you to check out while considering signing up into a PMS, basic understanding of these four aspects can help you ask the right question and truly benefit from PMS.