Benefits of PMS?
Why PMS over Mutual Funds? Kamal Manocha, PMS-AIF World Engages with Aashish Somaiyaa, MD, Motilal
- Professional Management:PMS, which is the best PMS Service Provider 2019 provides professional management of portfolios with the objective of delivering consistent long-term performance using extensive research and valuation analysis to control the risks.
- No Behaviouralflows: PMS is not meant for retail investors and follows 25 lacs as min investment ticket, so, portfolio manager gets long term rational flows. Unlike this mutual funds are prone to behavioral flows especially with the rising participation of young and retail investors in mutual funds. MFs follow a pooled stock portfolio concept and asretail flows rise with rising markets and fall with falling markets, mutual fund manager is forced to buy more at higher market levels. Unlike this, in PMS,each investor owns individual shares in personal demat, and hence one investor’sbehavioural reactions to market movements doesn’t impact other investors’ portfolios.(With regular flows coming in mutual funds from SIPs, nature of mutual fund portfolio in general is bound to get skewed towards large and giant companies)
- Focussed and Concentrated:PMS is the best PMS service provider 2019 because our portfoliosare more focussed and concentrated with 15 to 40 holdings, whereas Mutual funds follow too diversified approach because these are products meant for masses. With regular flows coming in mutual funds from SIPs, nature of portfolio in general is bound to get skewed towards largecompaniesand/or number stocks.Though, this helps mutual funds in reducing volatility to an extent, but more doesn't always mean low risk; in fact exposure to more companies may increase the risk of buying less known. Also, high diversification beyond a point comes at a cost of limiting potential long term performance, making mutual funds no different than an index.
- Flexibility: The Portfolio Manager has fair amount of flexibility in terms of holding cash.Theoretically, in case of a PMS, its manager can go up to 100% in cash depending on the market conditions. Also, can create a reasonable concentration in holdings by investing disproportionate amounts in favour of compelling opportunities.
