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Portfolio Management Services

PMS or Portfolio Management Services is a tailor-made professional service offered to cater to the investment needs of a niche segment of clients. The clients can be high net worth Individuals or entities. A portfolio management service provides professional management to investors who are prepared to invest a big sum (which is based on SEBI directives in this regard).

Investors turn towards the stock market, expecting to make a fortune. Yet a majority of times, most of them get stuck between the emotions of greed and fear. The trouble is that many investors tend to over-diversify their portfolio by adding a greater number of stocks, which is likely to take the investor backward rather than forward. Investing is an art. It takes knowledge about the stock market and more importantly the strategy and understanding of the businesses and economic cycles.

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Portfolio Management Services (PMS), is an investment management service offered by the Licensed Portfolio Manager. The investment portfolio can be diversified into stocks, fixed income, and other structured products. These services can potentially be structured and tailor-made to meet specific investment objectives based on the risks, rewards, and goals of the investor as reflected in the Investment Policy Statement. PMS offers customized equity options. But you generally need to invest a larger sum to avail the services of a Portfolio manager. The minimum investment required for PMS is decided by SEBI. At present this minimum ticket size is Rs. 50 lac.

A portfolio manager has a thorough understanding of the businesses and uses it to improve investors' gains. The managers have a clarity of the investor's risk and reward expectations and use an appropriate and suitable strategy in order to deliver the high potential returns.

Types of Portfolio Management Services

Active or Passive Management


Active Portfolio Management: The active portfolio manager aims to make better returns than the overall markets i.e. to generate Alpha. Higher returns would involve higher than the normal risk in the strategies and therefore, the portfolio manager tries to downsize the risk by diversifying its investments into various asset classes, sectors, and businesses. The turnover of the assets under management is generally high as compared to the Passive style of managing funds.

Passive Portfolio Management: Exactly opposite to the active style is the Passive style of portfolio management. The portfolio manager generally experiments with the Index funds which have a relatively lower turnover and reasonably decent long-term returns.

Discretionary or Non-Discretionary Management


Discretionary Portfolio Management: A discretionary manager is given full flexibility to make decisions for the investor. While the individual goals, risk appetite, and time-frame are taken into consideration, the manager adopts the appropriate strategy that he thinks is the best suited considering the investment policy statement. The fees for such managed funds are generally higher because of higher involvement in decision-making as well as more efforts by the manager.
Once the cash has been handed to the professional, the investor sits back and trusts that the profits will roll in.

Non-Discretionary Portfolio Management: The non-discretionary manager is more like an advisor than a portfolio manager himself. He advises the investor on the best possible course of action. The risks and rewards are clearly mentioned in the advisory note while the discretion to take action is total with the investor. Only once the manager has been given the go-ahead, the portfolio manager take the appropriate action on the investor's behalf.