As people become richer, it’s natural for them to wish for above-average returns from their savings. Towards this end, some opt for portfolio management services, or PMS, offered by various entities registered with the market regulator.
PMS have equity and debt options. Earlier, they used to offer real estate, unlisted shares and structured products options as well, but now these come under the Alternative Investment Fund (AIF) category and are managed according to the market regulator’s separate regulations on AIF.
As debt mutual funds are more tax-friendly, there are not many takers for the debt option under PMS. Let’s see how the two competitors, equity PMS and equity mutual funds, fare against each other.
“PMS offer customised equity options, but you should have a large fund for that,” says Debashish Mallick, managing director and CEO of IDBI Mutual Fund. PMS are offered by banks, brokerages, independent investment managers and asset management companies.
PMS were a big hit before the 2008 market crash but faced accusations of misuse. Many were not registered and indulged in heavy churning. After that, the Securities and Exchange Board of India, or Sebi, introduced stringent regulations. Among other things, it raised the minimum investment limit from Rs 5 lakh to Rs 25 lakh. It also banned pooling of accounts of different investors.