Surge in equity markets have not only assisted inflows into equity funds, but also helped portfolio management services (PMS) provided by asset management companies. Senior executives in the industry say that assets swelled to Rs 35,000 crore in June as compared to Rs 15,000 crore two years ago.
Typically PMS, which has greater flexibility and customisation compared to equity mutual funds, is offered to high net-worth individuals (HNIs) and affluent investors. Minimum ticket size to avail PMS services from fund houses is Rs 25 lakh. Senior players in the mutual fund industry say that, even in the PMS space most of the assets are managed by top five fund houses which includes ICICI Prudential AMC, HDFC AMC, Birla Sun Life AMC, Reliance AMC among others.A Balasubramanian, CEO, Birla Sun Life Asset Management Company (AMC) says, “Our PMS business is growing. Growth in our PMS is largely spurred by performance, as it is largely focused on the small and mid-cap space. The risk is higher compared to Mutual Fund schemes, as the reward is also higher. PMS is mostly favoured by HNIs who don’t shy away from taking the extra risk as long as they get extra alpha.”
There are three types of portfolio managers-discretionary,non-discretionary and advisory. In discretionary PMS, the choice and timing of the investment decisions rest with the fund manager, while in non-discretionary PMS, the portfolio manager gives investment and the client takes the decision on choice and timing. The portfolio manager executes the trade on behalf of the client.
“We have seen good growth in our PMS assets. Two years ago, we had assets of Rs 300 crore and now it has growth to Rs 2,000 crore. It will continue grow, as it is true reflecting of the wealth effect. Money moving into capital market has remained lot more transparent and that’s where AIFs, PMS will grow,” added A Balasubramanian.
Officials in the industry say that, most of the money in the PMS has flown into mid and small cap schemes and has given strong returns in the past few years. “We have been delivering returns in the range of 22-25% in the last four years and we have seen many new investors coming to PMS. Another advantage of PMS is that, we can run a concentrated strategy which can give huge returns if we are into right stocks,” said a fund manager from the leading fund house on condition of anonymity.