What Is Portfolio Management Service (PMS) ?: Why Portfolio Investment Investment?

What is Portfolio Management Service (PMS)?
Portfolio Management Service (PMS) account is an investment portfolio in Stocks, Debt, and fixed
income products managed by a professional money manager, which can potentially be tailored to meet
the specific investment objectives. When you invest in PMS, you own individual securities, unlike mutual
fund investors, who own the entire funds' units. One has the freedom & flexibility to tailor a portfolio to
address personal preferences and goals. Although the Portfolio manager may oversee hundreds of
portfolios, your account may be unique.
As per SEBI guidelines, only those registered with SEBI to provide PMS services can offer PMS to
clients. There is no separate certification required for selling any PMS product. So, this is a case where
mis-selling can happen. As per the SEBI guidelines, the minimum investment required to open a PMS
account is Rs. 50 Lakhs. However, different providers have different minimum balance requirements for
other products.
Types of PMS
1. Discretionary PMS
The investment is at the discretion of the fund manager & the client has no intervention in the
investment process. In other words, investment decisions are made at the portfolio manager's
Discretion. This means that the client must have the utmost trust in the investment manager's
capabilities. The client gives the authority to the portfolio manager to manage the securities in the
portfolio.
2. Non- Discretionary
Under this service, 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
the trade is done by the portfolio manager.
Why Portfolio Investment Investment?

Financial market is increasingly complex, and managing the portfolio is very complicated, time-
consuming, and requires more effort. Often, an investor has money but doesn't have the proper
knowledge to explore investment opportunities. Portfolio Management Service (PMS) can help in
solving all the problems. Just assign investment to portfolio management service, who then
responsible for managing the portfolio performance.
There are many benefits of investing in Portfolio Management Service: -
 Professional Management: PMS is managed by professional portfolio managers who

are experts in their field. The strategies designed by him will be as per the objective
of the investor.
 Transparency: Investors can quickly get information regarding even the smallest detail
about their portfolio. Such a transparent mechanism helps investors make the right
decision based on how his/her investment is doing through continuous monitoring. The
investor is always aware of its holdings and the market value of his investment.
 Customization of investment: Investor can discuss and decide with the portfolio
manager; based on an investor's risk tolerance and expectation regarding returns, the
portfolio manager can diversify the investments.
 Ease of transaction: All the paperwork and other administrative action taken care of by
the portfolio manager, the investor, need not be involved in any such work. Periodic
report of portfolio shared by a portfolio manager regularly.
Mutual Funds
A Mutual Fund is a trust that pools the savings of many investors who share a common
financial goal. The money thus collected is then invested in a capital market instrument
such as shares, debentures, and other securities. Its unit holders share the income earned
through these investments, and the capital appreciation realized in proportion to the
number of units owned by them.
Thus, a mutual fund is the most suitable investment for the common man. It offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.
Type of Mutual Funds
1. Open-Ended Scheme: Under this scheme, investors can buy or sell units at any
point in time. It does not have any fixed maturity period.
2. Close-ended Schemes: This type of scheme has a Fixed or Stipulated period, and
investors can invest only in the initial launch period. Once this offer closes, no new
investments are permitted. An investor can invest in the scheme at the time. This
scheme has a stipulated maturity period, e.g., 5-7 years.
3. Interval Funds: It operates as a combination of open and close-ended schemes,

allowing investors to trade for a pre-defined time. They can be traded on the stock
exchange or sold in the open market during the pre-determined interval at NAV
related price.
Choosing which scheme to go for depends upon growth, stability, income & risk
appetite in mind.
Why invest in Mutual Funds?

Mutual Fund investment is becoming popular with individual investors because of
the advantages they provide.
Here are a few advantages of investing in mutual funds: -
1) Portfolio diversification -It enables the investor to hold a diversified
investment portfolio even with a small amount of investment Rs. 500
2) Professional Management – The investment management skills, along with
the needed research into available investment options, ensure a much better
return than what an investor can manage on his own.
3) Diversification of risk - The amount of money pooled by the investor,
invested by the mutual fund company into various marketable instruments
like debt, equity, bond, etc. reduces the chances of loss by diversifying funds
in different avenues.
4) Liquidity – Investors may be unable to sell shares directly, easily, and
quickly. When they invest in mutual funds, they can cash their investment
any time by selling the units to the fund if it is open-ended and get the
intrinsic value. An investor can sell the units in the market if it is a closed-
ended fund.
5) Transparency – Fund gives regular information to its investor on the value
of the investment in addition to the disclosure of portfolio held by their
scheme, the proportion invested in each class of assets, and the fund
manager's investment strategy and outlook.
What is Alternative investment funds?
In India, Alternative investment funds(AIFs) are defined in regulation 2(1)(b) of the Securities and
Exchange Board of India (alternative investment funds) regulation 2012.
it refers to any privately pooled investment funds (whether from Indian or foreign sources) in the form of
a trust or a company or a body corporate
The funds which come under AIF are

1. venture capital funds
2. PIPE (private investment in public equity) fund
3. Private equity funds
4. Debt funds
5. infrastructure equity fund
6. real estate funds
7. SME Fund
8.social venture funds
Categories of AIF
Category 1- Funds that invest in startup small and medium enterprises and new businesses are often
considered viable economically desirable for the government for regulators.
Category 2- Funds invested in various equity securities and debt securities come under this category.
Funds that do not leverage or undertake to borrow other than that to meet the operational requirement
which does not fall under category 1 and 3.
Category 3- Funds which aim at short-term Returns fall under this category. The funds that undertake
diverse for complex trading strategies, including investment in listed or unlisted derivatives.
Category 1 & 3 AIF or schemes launched by such funds shall have a minimum tenure of 3 years.
Who can invest?
 Investors can be Indian, NRI, or foreign nationals

 All the categories of AIFs in India except angel fund require a minimum investment of Rs. 1
crore. For the angel fund, the amount is Rs. 25 lakh.
Why invest in any Alternative Investment Fund?
1. Unrelated to stock market- An investment that is uncorrelated to the stock market; it does not
change relative to the market's ups and downs. The stock market is famously unpredictable, even in a
stable economy, and alternatives are largely shielded from the unpredictable swings in the public markets.
2. Optimum Portfolio: Alternate Investment Funds offer more flexibility in fund managers' hands,
which allows them to create the optimum portfolio in line with investment objectives.
3. Smart Strategies: AIF offers smarter investment strategies that aim at generating enhanced risk-
adjusted returns by use of derivatives and long-short hedging style of investing.

4. Unlisted Exposure:
Alternate Investment Funds offer investment options like startup investments through venture capital
funds and private equity investments through PE funds, making them the right product for investors
looking for a diversified and professionally managed portfolio in this space.
Difference between PMS, AIF & MF
Particulars PMS AIF MF
They are regulated They are regulated Securities and

by SEBI (Portfolio by SEBI (Alternative Exchange Board of
Regulation
Managers) Investment Funds) India (Mutual Funds)
Regulations 1993 Regulations 2012. Regulations, 1996
Not pooled, investors Pooled Pooled

Investment
individually hold
type
stocks
PMS can provide two AIF registration can Two types of MF-

types of services: be done in any of the I. OPEN ENDED
– Discretionary or following 3 II. CLOSE ENDED
– Non-discretionary categories
depending upon their
Types
investment
objectives:
– Category I
– Category II
– Category III
No threshold limit is No of investors for Each scheme and

prescribed. Portfolio every scheme or individual plan(s)
Manager can have fund shall not exceed under the schemes
any number of one thousand. should have a
Number of clients. minimum of
Investors 20 investors and no
single investor should
account for more than
25% of the corpus of
the scheme/plan(s)

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What Is Portfolio Management Service (PMS) ?: Why Portfolio Investment Investment?

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What is Portfolio Management Service (PMS)?

Why Portfolio Investment Investment?

There are many benefits of investing in Portfolio Management Service: -

 Professional Management: PMS is managed by professional portfolio managers who

Type of Mutual Funds

3. Interval Funds: It operates as a combination of open and close-ended schemes,

Why invest in Mutual Funds?

What is Alternative investment funds?

The funds which come under AIF are

 Investors can be Indian, NRI, or foreign nationals

Why invest in any Alternative Investment Fund?

Particulars PMS AIF MF

They are regulated They are regulated Securities and

Not pooled, investors Pooled Pooled

PMS can provide two AIF registration can Two types of MF-

No threshold limit is No of investors for Each scheme and

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