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The PMS option Non-Resident Indians (NRIs) who wish to avail of a more personalised investment service and have a large investible surplus can explore the Portfolio Management Service (PMS) option. Simply put, PMS is akin to mutual fund investing in a more personalised form. The PMS fund manager’s services are made available to investors on a one-on-one basis vis-à-vis on a collective basis, as is the case with a fund house. While selecting a PMS, the service provider’s past performance and track record undeniably play a major role. Investors should study the returns clocked by the portfolio manager over an extended 3 to 5-Yr period. The performance can be compared vis-à-vis that of a similar styled mutual fund or a benchmark index like BSE Sensex or S&P CNX Nifty. Also get some insight into the investment processes of the PMS provider. How many stocks does he usually maintain in the portfolio? Is the portfolio well-diversified (across stocks and sectors) or does it pursue a concentrated investment strategy of investing a large chunk of assets in a few stocks/sectors. Does it invest mainly in mid caps or is it well-diversified across market capitalisations (large caps/mid caps)? Does it pursue the value or growth style of investing? Admittedly, this can prove to be quite a bit of ‘due diligence’ for you. Remember you are opting for a PMS and are likely to ‘entrust’ considerable money to it, so you need to clarify these critical points to understand if the PMS’ investment philosophy coincides with your own. It is equally pertinent to determine if the present investment team was responsible for the track record. Often, a star fund manager quits the team and the PMS continues to showcase its impressive track record as if nothing has changed. The service standards play a vital role in determining the attractiveness or otherwise of a PMS. Enquire about the Relationship Manager (RM) allotted to you, the number of accounts he handles and how easily his services can be availed of. The average time taken for responding to queries and providing reports should be a fair indicator of the PMS’ service standards. Fees charged by the PMS are an important factor as well. The structure could vary from those involving both fixed and variable (a percentage of profits made) components to a fee structure entailing only a variable compensation. Find out how cost-competitive the PMS is as compared to its peers. The good news is that even if fees are on the higher side, you can negotiate the same. The PMS can be either discretionary or non-discretionary in nature. Under the discretionary form, the portfolio manager simply makes recommendations to the client. The decision to invest in the same is left at the client’s discretion. On the contrary, under the non-discretionary service, the portfolio manager has a greater degree of freedom; he takes investment decisions without explicit approval from the client. Pick a service that best suits your investment temperament. The right investments play an important role in enabling you to achieve your financial goals and objectives. There is no ‘standard or fool-proof’ method for selecting the right PMS; however due care in the selection process can ensure that you are that much closer to being associated with the right PMS.
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