1. Personalised Investment Options
PMS provides individualized investment solutions to meet the needs of a wide range of clients. Investors can choose from a variety of portfolios, including large-cap, mid-cap, multi-cap, and small-cap, among others, depending on their risk appetite. Similarly, some PMS provides conventional goods, while others provide custom investment alternatives according to the client’s needs.
PMS investment differs from mutual funds in that it allows you to own a significant portion of a firm. A portfolio manager creates investment strategies and trading timings based on the needs of a single investor and then implements them (depending on the type of PMS selected). The importance of PMS is from two major objectives i.e., investors who may wish to avail the services of a Portfolio Manager to manage direct holdings of equity or fixed income, or clients who are looking at specific thematic exposure which can be positioned as satellite strategies in their overall financial portfolios.
2. Robust Risk Management Plan
Portfolio Management Services isn’t just about doing market research and making timely recommendations. It also entails a well-thought-out risk management strategy in which portfolio managers keep a close eye on diversification and monitor market, interest rate, and inflation risks.
Because the investment market is characterized by continual swings, keeping track of or monitoring these factors can assist them in making the best investment decisions during bullish and bearish periods. Portfolio managers can also protect their investors’ investment by conducting regular market analyses. As a result, PMS suppliers can reduce risk and maximize returns in a variety of market conditions.
3. Superlative Returns
PMS investment is linked to ongoing customizations in response to changing circumstances. As a result, it outperforms other investment options such as mutual funds. To analyze the financial market and current developments, researchers collaborate with a portfolio manager. They also keep track of an investor’s portfolio in order to make informed (entry/exit) decisions and ensure returns in volatile markets.
4. SEBI Regulated
Portfolio Management Service is a flexible investment option that operates in a legally binding investor-fund management relationship. The Securities and Exchange Board of India (SEBI) has severe standards in place for PMS managers and Asset Management Companies (AMCs) in terms of experience and operating norms. As a result of the regulatory characteristics of PMS investment, it has become a safe refuge for investors.
Securities and Exchange Board of India (Sebi) recently came up with a set of proposals to make portfolio management services (PMS) more transparent, standardize the offerings and make them more investor-friendly. While some significant changes have been recommended, the committee has partially touched upon the fee structure, a problematic area for investors to understand.
Every investor is informed about every transaction in Portfolio Management Services. The cost structure for this investing option is likewise open. Because PMS investment is governed by law, portfolio managers are required to inform investors of all transactions and associated fees. Furthermore, investors receive a monthly statement that includes all of the facts, making it easy for them to keep track of their expenditures.
Sebi has done a great job of bringing transparency by following standardized NAV (Net Asset Value) based returns for all PMS. Also, the details of the sharing distribution fees are an extremely welcome step. As per the Sebi, the portfolio managers are required to invest funds of their clients in the securities listed and traded only on a recognized stock exchange, money market instruments, units of mutual funds, and other securities as specified by the board from time to time.
Besides, the portfolio managers have to invest in units of mutual funds through direct plans only and should not charge any distribution fees to the client. Further, the board has also barred the portfolio managers to not invest client’s funds in derivatives.