Things You Must Know When Choosing PMS Investment

27th September 2022 - Bytes - White Oak

PMS or Portfolio Management Services is a more specialized and personalized investment portfolio designed for high-net-worth individuals. PMS needs an investment of at least INR 50 Lakhs and higher risk tolerance; hence it is suitable for investors who are more risk-aware. 

In PMS, an experienced portfolio manager backed by a research team manages an investment portfolio on behalf of the HNI investor and ensures consistent long-term returns while managing risk. 

So, what should investors consider when selecting a PMS that is right for them?

Is the PMS provider SEBI registered?

As per SEBI regulations, PMS providers must be registered with SEBI. This ensures that the PMS provider is transparent and functions under the guidelines provided by SEBI. 

What is the track record? 

While investing in PMS, it is always better for an investor to choose a well-established firm that has displayed consistent performance across market cycles. 

What is the investment strategy in PMS?  

An investor should understand the portfolio manager's investment strategy and how it aligns with their investment goals. The investor should further evaluate only after getting more clarity about the philosophy and the process. 

What is the amount of risk taken?

Like any other investment option, PMS also comes with certain risks. It is crucial for an investor to be clear about market risks, interest rate risks, and inflation risks, among others, beforehand. Check the risk management strategies employed by the portfolio manager. 

Who is the Fund Manager?

A portfolio manager plays a crucial role in PMS investment. Therefore, checking a portfolio manager's background, skills, professional experience, and quality is vital. 

  • Does a portfolio manager have good ethics and business practices? 
  • Does he/she communicate clearly, fairly and regularly with his investors? 
  • Has he/she had any issues with the government regulator? 
  •  Are investors exiting the PMS frequently? 

A thorough understanding of the above will help an investor associate with the right portfolio manager in their wealth creation journey. 

What are the types of charges associated with the PMS? 

A PMS investment comes with various charges like management fees, performance fees, entry or exit loads, and other charges like brokerage, custody, accounting, among others. Investors need to consider all these costs before arriving at any decision.

What about the track record? 

Checking the past performance of PMS managers helps investors gain comprehensive knowledge about how much returns they have generated over previous market cycles. Even though past performance may not necessarily be repeated in the future, it can definitely help understand the consistency of the PMS in generating profits.

In the last few years, Portfolio Management Services in India has grown rapidly and become one of the most preferred investment choices among high-net-worth individuals. 

PMS can provide investors with a customised and concentrated portfolio that helps them generate higher returns. However, investors must analyse the essential factors related to PMS investment and select the right PMS provider to ensure higher profitability.

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