PMS

 PMS

                                                   

The stock market in India is witnessing unprecedented boom in recent years. The Sensex has returned a gain of 47% in 2007. The Sensex gave a cumulative return of 635% in less than five years.  The return on certain individual stock is mind bogging. Equity investment has emerged as the most rewarding asset class. A lot of investors are coming to the market on every day. But all these do not mean that all investors are smart enough to outperform or just keep up to the benchmark index.

The World Wealth Report by Merrill Lynch and capgemni- HNIs in India with assets –apart from primary dwelling house worth more than 1 mn. $ Rs.4 crores is increasing at 20.5% -second only to Singapore 21%. These emerging newly rich individuals lack time or specialized skill to manage their assets. They delegate the task to professional managers called PMS. This has stimulated the importance of PMS attracting almost all brokerages, some banks and individual professional people.

PMS THE CONCEPT

PMS is part of the wealth creation process. An experienced financial expert can help an investor to prepare a  detailed plan of saving and investment based on his future financial needs and available resources.

• These PMS manages the money entrusted to them by the clients and promise to maximize returns and minimize risk through careful allocation of the money on a portfolio of investments including largely of equities.  They provide expert guidance and knowledge support to minimize the risk of market volatility. The Portfolio is tailor made to client requirements.
• Focus is given on value based investment with medium to long term perspective.
• Diversified portfolio: with no undue concentration in any sector or stock
• The fund manager constantly makes in touch with the clients to understand their needs and get their feedback.
• They charge a fee/ commission for their services

Features of PMS

• Research based buying and selling of stocks.
• Focused and disciplined approach towards investments.
• Access to broader picture in terms of economy, commodity cycle etc.
• A dedicated research department which analyses various developments and picks out best performing sectors / stocks for near term gains.

The client gets:

• Better return on your investments.
• Savings on Time as well as Costs.
• Hassle free, as there is a team of trained work force to look after various procedural requirements.
• One can easily focus on his / her regular profession with desired “peace of mind”.

How does it Work?

• The client provides information on his existing holding of shares/cash available.
• Based on his risk profile and return expectations, we design a tailor made portfolio.
• Customized Portfolio designed after ascertaining the risk return profile of the client.
• Agreement prescribed by SEBI and necessary Broker documents as per NSE are executed.
• Arrangement is renewed automatically after a year.

Documents

• Portfolio Advisory Agreement setting out the terms and the fee structure.
• Individual client information form.
• Authority letter favoring PNVF to execute transactions.
• Account opening form with our designated broker.
• Depository opening form with our designated depository.

THE INVESTMENT HORIZON

• Bank Deposits
• Real estates
• Insurance policies
• Mutual Funds
• Shares
• Derivatives

EQUITY INVESTMENT

►   HIGH RETURNS

►   ADEQUATE  SAFETY

►   LIQUIDITY

►   CONVENIENCE

►   TAX ADVANTAGES

INVESTMENT RISKS

►   BUSINESS RISKS

►   FINANCIAL RISKS

►   LIQUIDITY RISKS

►   MARKET RISKS

A SUCCESSFUL INVESTOR NEEDS

►   STOCK PICKING SKILLS

►   TIMING SKILLS

►   RESEARCH SKILLS

►   DECISION MAKING SKILLS

WHY PMS?

►   COMPLEX NATURE OF FINANCIAL PRODUCTS, DERIVATIVES, MF SCHEMES

►   GREATER VOLATILITY IN STOCK MARKET

►   NEED FOR HEDGING INVESTMENT AGAINST BUSINESS RISKS

►   LACK OF KNOWLEDGE AND EXPERIENCE OF INVESTORS

PMS - THE CONCEPT

An integrated approach to allocate, optimize and manage a portfolio of assets or investments by a professionally competent person or institution.

WHAT IS PMS?

   ►   FIRMS                                                             

   ►   INDIVIDUALS

   ►   TRUSTS     

   ►   COMPANIES

   ►   SOCIETIES

     

DEPOSITS SURPLUS FUNDS WITH PMS

  

    ►      ALLOCATES IN INVESTMENTS OF VARIABLE DEGREES OF RISKS AND RETURNS

RETURNS THE FUNDS WITH APPRECIATION

THE BACKGROUND OF PMS

►   Robust Growth in GDP (9% + )

►   Increase in Per capita Income ($1,000 )

►   Large domestic savings rate (35% of GDP)

►   Rapid increase in HNIs

   A Merrill Lynch-Cap Gemini World Wealth Report states that the No. of HNIs in India in 2006-07 with net assets of US $1 mn. (Rs. 4 Crores)

      increased by 20.5% to 1,00,015.

OBJECTIVES OF PMS

►   MEET INVESTMENT GOALS

►   SUPERIOR RETURNS

►   REDUCE RISK

►   FACE VOLATILITY

►   RESEARCH BASED INVESTMENT

THE PMS ADVANTAGE

►   PROFESSIONAL EXPERTISE

►   ACTIVE MANAGEMENT AND TRACKING

►   HASSLEFREE OPERATIONS

►   LIQUIDITY AND TRANSPARENCY

►   CUSTOMIZED PORTFOLIO

►   LATEST COMMUNICATION SYSTEM & REALTIME DATA

DOCUMENTS

►   PORTFOLIO ADVISORY AGREEMENT SETTING OUT THE TERMS AND THE FEE STRUCTURE.

►   INDIVIDUAL CLIENT INFORMATION FORM

►   AUTHORITY LETTER TO EXECUTE TRANSACTIONS.

►   ACCOUNT OPENING FORM WITH DESIGNATED BROKER.

►   DEPOSITORY OPENING FORM WITH DESIGNATED DEPOSITORY

THE PROCESS OF PMS

►   DEFINING INVESTMENT OBJECTIVES OF CLIENTS

►   DEVELOPING STRATEGIES

►   RESEARCH BASED PORTFOLIO SELECTION

►   MONITORING MARKETS

►   PORTFOLIO REVISION

PMS – THE KEY FACTORS

►   TIMING THE MARKET

►   SELECTION OF THE SUPERIOR STOCKS

►   CHANGING THE INVESTMENT STRATEGY

►   CHURNING THE PORTFOLIO

►   HAVING A LONG TERM INVESTMENT PHILOSOPHY

PMS STRATEGIES

►   DESIGNING INVESTMENT STRATEGIES

►   ESTIMATING SECURITY RETURNS AND RISKS

►   OPTIMIZING STRATEGIES

►   CUSTOMIZED SOLUTIONS

►   CLIENT REPORTING AND TRANSPARENCY

THE TARGET GROUP

►   PROFESSIONALS

►   BUSINESSMEN

►   NRIs, HNIs

►   EMPLOYEES GETTING ESOPs

►   FILM STARS, CEOs OF Cos.

►   RICH FARMERS, COMMODITY TRADERS

PMS PROVIDERS

►   MERCHANT BANKERS

►   PRIVATE AND FOREIGN BANKS

►   BROKERAGES

►   SEBI REGISTERED PMS PROFESSIONALS

PMS- THE CHALLENGES

►   NO NAV- PERFORMANCE EVALUATION IS DIFFICULT

►   MINI. AMOUNT SPECIFIED BY SEBI IS RS. 5 LAKHS

►   UNAUTHORIZED OPERATORS

►   HIGH MANAGEMENT FEES-2- 3% OF PORTFOLIO VALUE + PROFIT SHARING 10-30% OF PROFIT REALIZED BEYOND A LIMIT.

PMS- THE FUTURE OUTLOOK

►   INVESTOR FRIENDLY AND CUSTOMIZED SERVICE

►   MORE SEBI CONTROL ON PMS

►   NEED MORE ACCOUNTABILITY AND TRANSPARENCY  OF OPERATORS

►   NEED BENCHMARKING IN PORTFOLIO RETURNS

 Copyrights©Dr.A.M.Viswambharan