Portfolio Management Services or PMS are licensed and professional services that cater to investment objectives of a niche segment of long-term investors. They are SEBI regulated and are offered by specialised financial companies to manage the net worth of HNIs, UHNIs, NRIs or institutions
There are various benefits to Portfolio Management Services:
- Professional Expertise
Portfolio Management Companies employ Portfolio Managers who are highly skilled investors and deeply understand the intricacies of financial markets’ functioning. They utilise years of experience to devise and implement investment strategies to meet client goals and constraints
- Diversification
PMS can offer diversification advantages, which aim to invest in assets that are not highly correlated with each other, effectively spreading investments across asset classes, industries and geographies to minimise the investment risk of a portfolio.
- Personalised Investment Strategy
One of the most significant benefits of Portfolio Management is the tailor-made investment strategies it employs based on the investor’s risk appetite, investment horizon and financial objectives. Types of portfolio management strategies include value investing, growth investing, income investing, and quantitative investing, among others.
- Transparency
Real time Transparency is another one of the key benefits of PMS. Investors are provided with regular updates and performance reports on their portfolios. Information on investment strategies exercised, including asset allocation and risk management techniques are communicated to the investor regularly
- Tax Efficiency
PMS is an attractive option for tax-conscious investors as they focus on minimising tax burdens for investors by recognising tax- efficient investment vehicles
- Exclusive Investment Opportunities
Investing in PMS allows investors access to opportunities that are not available to the public such as IPOs, private placements and alternative investments
- Portfolio Monitoring and Re-balancing
Portfolio Management companies regularly monitor and review portfolios to ensure they’re well-balanced and outperform the benchmark index set. The portfolio is continually analysed and may also be reshuffled and balanced across various industries and geographies, allowing companies to reduce the overall volatility of their portfolios. However, typically PMS follow a low churn although it depends on the individual portfolio strategy.
Types of Portfolio Management Services
There are numerous types of Portfolio Management Services available to investors. One of the most seen type of PMS is discretionary portfolio management. Under this the Portfolio manager is granted authority to execute investing decisions without the requirement of approvals from investors, allowing the manager to promptly benefit from market opportunities and respond briskly to any negative changes
- Non-discretionary portfolio management is another type of PMS wherein the portfolio manager provides research, analysis and investing recommendations, however the final authority for implementation of these decisions is held by the investor. This is most suitable for investors who prefer retaining control over investing decisions
- Advisory portfolio management is a type of PMS where the portfolio manager exclusively offers investment advice to the client. The client makes all final investment decisions and executes the trades through their personal trading account
In addition to these types of PMS, there are specialised PMS offerings such as equity or debt PMS, which focus purely on investing in equity markets and fixed-income securities respectively. Hybrid PMS offers a combination of both debt and equity investments allowing for a well-balanced portfolio
India hosts a considerable market for PMS that have consistently outperformed benchmark indices despite periods of volatility. The best PMS services in India for an investor vary based on their risk tolerance and needs.
Conclusion
The benefits of investing in PMS are manifold, the expertise, risk management and customised investment approaches are all contributors. One must opt for a Portfolio Management Service that best suits their requirement and is in alignment with their investment philosophy and so they can pursue with conviction.