Portfolio managers are professionals who manage the investments of their clients, which can include individuals, institutions, and organizations. They are responsible for making investment decisions on behalf of their clients and aim to achieve their investment objectives and goals. In India, portfolio management services are regulated by the Securities and Exchange Board of India (SEBI).
Hiring a portfolio manager in India can offer several benefits, including expertise, customization, diversification, active management, transparency, and convenience. Investors should carefully evaluate potential portfolio managers based on their investment philosophy, track record, fees, and other factors before making a decision.
History:
The portfolio management industry in India has grown significantly in recent years, with the rising number of high-net-worth individuals (HNIs) and growing demand for customized investment solutions. In 1993, SEBI introduced regulations for portfolio management services in India, which helped to formalize the industry and provide a framework for investor protection. Since then, SEBI has made several changes to the regulations to enhance the transparency, accountability, and safety of PMS for investors.
The benefits of hiring a portfolio manager in India include:
- Expertise: Portfolio managers have a deep understanding of the financial markets, investment strategies, and risk management techniques. They use their expertise to create investment portfolios that meet the unique needs of their clients.
- Customization: Portfolio managers can tailor investment portfolios to meet the specific needs and goals of their clients. They take into account factors such as risk tolerance, investment horizon, and liquidity needs to create a customized portfolio.
- Diversification: Portfolio managers use a diversified investment approach to minimize risk and maximize returns. They invest in a variety of asset classes, such as equities, fixed income, and alternative investments, to create a balanced portfolio.
- Active Management: Portfolio managers actively manage their clients’ investments to take advantage of market opportunities and mitigate risks. They regularly review and adjust their investment strategies to ensure that they align with their clients’ objectives.
- Transparency: Portfolio managers provide regular reports and updates on their clients’ investment portfolios, including performance, holdings, and fees. This helps clients stay informed about their investments and make informed decisions.
- Convenience: Hiring a portfolio manager can save investors time and effort in managing their investments. Portfolio managers take care of the day-to-day management of their clients’ portfolios, freeing up time for investors to focus on other aspects of their lives.
Laws:
SEBI regulates portfolio management services in India through its Portfolio Managers Regulations, 2020. These regulations prescribe the eligibility criteria, registration process, operational guidelines, and disclosure requirements for portfolio managers in India. Some of the key provisions of the regulations include:
- Eligibility criteria: Portfolio managers must meet certain eligibility criteria, such as having a minimum net worth, a clean regulatory track record, and qualified personnel with relevant experience.
- Registration process: Portfolio managers must obtain a registration certificate from SEBI to offer PMS in India. The registration process involves submitting an application, paying a fee, and undergoing a background check.
- Operational guidelines: Portfolio managers must adhere to certain operational guidelines, such as maintaining separate accounts for each client, providing regular reports to clients, and following ethical and professional standards.
- Disclosure requirements: Portfolio managers must disclose certain information to clients, such as their investment philosophy, fees and charges, risk management policies, and performance track record.
- Investor protection: Portfolio managers must take measures to protect investors’ interests, such as conducting due diligence on investments, managing risks, and complying with SEBI’s rules and regulations.
Types
Portfolio management services (PMS) in India offer a range of investment options to clients based on their risk profile, investment goals, and other preferences. Here are some of the common types of PMS available in India:
- Discretionary PMS: In this type of PMS, the portfolio manager has complete discretion over the investment decisions and can make changes to the portfolio without seeking the client’s approval. The client provides broad guidelines on their investment objectives, risk appetite, and other preferences, and the portfolio manager takes care of the rest.
- Non-discretionary PMS: In this type of PMS, the portfolio manager provides investment advice to the client but cannot make any investment decisions without the client’s explicit approval. The client retains full control over the investment decisions and can choose to accept or reject the portfolio manager’s recommendations.
- Advisory PMS: In this type of PMS, the portfolio manager provides investment advice to the client but does not have any authority to make investment decisions on their behalf. The client makes all the investment decisions based on the advice provided by the portfolio manager.
- Theme-based PMS: In this type of PMS, the portfolio manager invests in a specific theme or sector based on the client’s preferences. For example, the portfolio may focus on sustainable investing, technology stocks, or emerging markets.
- Value-based PMS: In this type of PMS, the portfolio manager seeks to invest in undervalued stocks or assets that are expected to provide a high return in the long run. The portfolio manager may use a range of strategies, such as fundamental analysis, to identify undervalued assets.
- Growth-based PMS: In this type of PMS, the portfolio manager seeks to invest in companies with high growth potential that are expected to generate significant returns in the future. The portfolio manager may use a range of strategies, such as growth investing, to identify high-growth companies.
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