Portfolio Management Services- an advanced way of investment

 

PMS portfolio management services, is a personalized investing option for clients with high net and very high net worth. With a higher level of personalization, PMS are comparable to mutual funds. Even if purchasing a PMS has a higher upfront cost, there are many advantages.

There are two types of PMS options available. They are;

·   Discretionary PMS:

The fund manager can make purchases based on their judgement under a discretionary PMS. In the scenario of discretionary PMS, the portfolio manager makes decisions independently and uses his expertise to carry out trades following the investor's expectations and financial plan.

·   Non-Discretionary PMS:

A non-discretionary PMS requires the client to consent to all transactions that are carried out to increase their portfolio value. The portfolio manager makes investment suggestions as part of a consultative investment approach.

Merits of PMS system:

·   Investing analysis and asset diversification into PMS are its most significant advantages. Experienced fund managers professionally oversee PMS, and technical and fundamental analyses are used to support their investment decisions. Fund managers with managerial experience choose the entry and exit timings. Additionally, portfolio managers use a comprehensive approach and help customers diversify their entire portfolio, which aligns with your overall financial strategy. Thirdly, PMS covers a diverse range of investment options, including commodities, structured goods, debt instruments, overseas assets, and real estate asset trusts and real estate. Such assets serve as an effective diversification technique because their prices do not directly fluctuate in response to equity market fluctuations. Investing in such commodities is substantially more complex and moves quickly if done through a PMS.

·   The amount of personalization offered to individual investors is a PMS's USP. According to their risk tolerance level, PMS allows investors to mix different asset classes. The portfolio is tailored according to the investor's desired level of liquidity and investment purpose. Additionally, the client must approve the portfolio manager's investment choices for non-discretionary PMS. Because of this, the investor has some influence. Investors' choices about their investments have no impact on the options available to other investors. For each of its investors, PMS has separate and independent holdings.

·   Regulators keep a close eye on PMS and fund managers. To the appropriate government agencies, portfolio managers must regularly present transaction statements, holdings, cost information, etc. The holding statements, revenue, costs, comparative fund performance, benchmarking, etc. that they have for investors get disclosed. To help investors make well-informed decisions, PMS offers comprehensive transparency to its investors.

·   The cost structure is furthermore flexible and transparent, thanks to PMS. Investors can choose between a fixed and adjustable fee structure. Performance fees are distributed as a proportion of the overall revenue that exceeds the chosen hurdle rate. Detailed statements that include the expense ratio and ongoing fees are provided to investors.

In-depth investment justification, a one-stop shop for investing, and direct investments made in the investor's name (as opposed to mutual funds) are just a few of the ancillary advantages. The tax efficiency of a Portfolio Management Services investment is diminished by capital gain tax, which is a drawback. Due to strict laws, it also includes tiresome paperwork. In conclusion, HNI and UHNI clients should give it some thought.