HNIs hit it off with portfolio managers in 2016

MUMBAI: Portfolio management schemes (PMS) have been one of the preferred routes for the wealthy individuals taking exposure to equities over the last year.That drove a sharp increase in equity PMS schemes, with the number of investors in such schemes growing 24% to 63,311 from 51,000 in the past one year. In the same period, assets under management grew 33% to `62,563 crore from `47,000 crore.

“The PMS business has witnessed good inflows in CY2016 as many HNIs (high networth individuals) and institutional clients needed unique portfolios to meet their investment requirements. PMS provided avenues like concentrated portfolios, small and micro-cap portfolios, etc., resulting in good inflows,“ said Nilesh Shah, managing director of Kotak Mutual Fund.

PMS services are offered by both mutual fund houses as well as boutique firms. Both domestic and NRI investors are pouring money into PMS.

Over the past year, fund houses like ICICI, HDFC, Reliance, Birla, Kotak and Motilal Oswal have seen good inflows in their PMS schemes, which require a minimum investment of `25 lakh. Looking at the rising demand, many portfolio managers have revamped their PMS offerings and some have completed their portfolio basket by adding small-cap portfolios.

Small cap stocks performing well has added to the attractiveness of PMS schemes.

Over the past three years, the large-cap oriented S&P BSE Sensex has given a return of 9%, grossly underperforming the S&P BSE Midcap Index that gained 23.24%.

The changing mutual fund regulation landscape has also led many distributors to sell PMS schemes over mutual funds to the rich. “With (regulator) Sebi making commission disclosure mandatory in mutual fund account statements, many distributors felt selling PMS was a better proposition,“ said a mutual fund distributor.

Many believe that a new set of informed investors, who have inherited stocks and do not find time to manage their investments, is turning towards portfolio management.

“A lot of investors with idle shares lying in their demat accounts have changed their mindset and are ready to assign this to professional portfolio managers to manage,“ said Amit Doshi, director of Care PMS, a Mumbai-based portfolio manager.

PMS scores over mutual funds as they run concentrated portfolios with higher risk and as little as seven stocks in a portfolio. In comparison mutual funds, which are seen as safer, restrict exposure to individual stocks and generally have more than 30 stocks in their portfolio.