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Portfolio Management Service

Portfolio Management Service (PMS) products are offered by SEBI registered Portfolio Managers. It comprises an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique.

Here are two types of PMS products:

Discretionary:

Under these services, the choice, as well as the timings of the investment decisions, rest solely with the Portfolio Manager.

Non-Discretionary:

Under these services, the portfolio manager only suggests investment ideas. The choice as well as the timings of the investment decisions rest solely with the Investor. However, the execution of trade is done by the portfolio manager.

How PMS works: 

Each PMS account is unique and the valuation and portfolio of each account may differ from one another. There is no NAV for a PMS scheme; however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Every PMS scheme has a model portfolio and all the investments for a particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme. However the portfolio may differ from investor to investor. This is because of:

> Entry of investors at different times.
> Difference in amount of investments by the investors
> Redemption/additional purchase done by investor

Market scenario — Eg If the model portfolio has investment in Infosys, and the current view of the Fund Manager on Infosys is “HOLD”(and not “BUY”), a new investor may not have Infosys in his portfolio.

Under PMS schemes the fund manager interaction also takes place. The frequency depends on the size of the client portfolio and the Portfolio Management Services provider. Bigger the portfolio, frequency of interaction is more. Generally, the PMS provider arranges for fund manager interaction on a quarterly/half yearly basis.

Minimum Investment Amount:

Investors need to invest at least Rs 50 lakh in a PMS.

Suitability:

The Investment solutions provided by PMS cater to high net worth (HNI) investors. The offerings are usually ideal for investors with high-risk appetite and are looking to invest in asset classes like equity, fixed income, structured products, etc, and who desire personalized investment solutions.

Taxability:

The tax system of PMS is Different from mutual funds as the Stocks held in PMS are considered as the stock held with the investors only, so every time the portfolio manager sells shares, there capital gain or loss and the tax liability will be borne by the investor. At the end of every year, the PMS house provides the audited capital gain or loss statement to its investors for tax calculation.

Short term capital gain (less than one year): 15% of the gain
Long term capital gain (more than one year): 10% of the gains in excess of Rs. One Lakh Per Year

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