What Is Portfolio Management Service?
Portfolio Management Service (PMS) in India is a specialized investment service offered to cater to the needs of high-net-worth individuals (HNIs). It involves the professional management of securities like stocks, bonds, and other assets, tailored to meet specific investment objectives. Here’s a detailed explanation:
Structure of Portfolio Management Service:
1. Portfolio Manager (PM):
A registered entity, typically a financial institution or a SEBI (Securities and Exchange Board of India) approved individual, responsible for managing the portfolio on behalf of the client.
2. Client:
High-net-worth individuals or institutions availing the service.
Types of Portfolio Management Services:
1. Discretionary PMS:
The portfolio manager has the authority to make investment decisions on behalf of the client without seeking prior approval for each transaction.
2. Non-Discretionary PMS:
The portfolio manager provides investment advice, but the client retains the final decision-making authority for each transaction.
Pre-requisites For PMS:
Fees Structure:
1. Management Fee:
A fixed percentage of the assets under management (AUM) charged annually.
2. Performance Fee:
A percentage of the profits generated by the portfolio exceeding a predefined benchmark or hurdle rate.
In summary, Portfolio Management Service in India provides high-net-worth individuals with personalized investment solutions, professional management, and diversification across asset classes, aiming to achieve specific investment objectives while mitigating risks.
