What Are Portfolio Management Services, and What Are the Advantages?

A research team supports the skilled portfolio managers and capital market experts managing your investment portfolio at risk-adjusted levels, whether it consists of equity stocks, debt, structured products, fixed income instruments, etc. PMS is a professional investment service. PMS as a service is sometimes extended to managing solely a stock portfolio. HNIs and UHNIs are the target audience for the service.

PMS as a Service: What is It?

PMS is a disciplined approach to boosting earnings while reducing the risk attached to your investments. Without having to put in any effort, you may utilise it to make well-informed decisions that are supported by in-depth research and reliable data. Additionally, you are better prepared to address market challenges. In the sector, many forms of PMS are common.

Depending on how the money is managed:

1. Active portfolio management:
   The basic goal of managing a portfolio is to maximise profits. The asset manager employs the Active Portfolio Management strategy to attempt to reduce risk by dividing your assets among several asset classes or equities that are uncorrelated or negatively correlated. A proactive portfolio manager continuously checks to make sure the holdings are in line with market prospects. This results in a higher turnover than the passive approach. Additionally, it permits the portfolio to seize opportunities that passive management could have otherwise prevented. It is crucial to remember that active portfolio management frequently involves a moderate to high-risk profile.
   
   Important: Investors may take advantage of shifting market circumstances and find new investment opportunities by routine monitoring and rebalancing; all the while keeping their portfolio’s risk and return profile constant.
   
2. Passive portfolio management:
   As the name implies, this strategy focuses on fixed portfolio distributions that fit well with the current market trend and are strong enough to withstand market turbulence. Since index funds grow over time passively and without management, investment managers in this case opt to invest in them. In this kind of fund management, the investment manager’s or fund manager’s involvement is minimal. This is frequently seen as a somewhat conservative method of managing your portfolio. With passively managed funds, there is a low turnover rate. They do, however, offer appealing profits over the long term.

Depending on the investor’s control:

1. Discretionary Portfolio Management:
   In this style, the portfolio is entirely within the investment manager’s control. He has been given responsibility for overseeing a certain portfolio. Based on your goals, level of risk tolerance, and length of tenure, the manager decides on a viable plan and implements it without consulting the investor. The portfolio manager, however, always acts in conformity with the mandate or goals of the portfolio. Under this form of management, the investors’ best interests are protected. It works especially effectively when the portfolio manager needs to make an instant decision about the portfolio based on the direction of the market.
   
2. Non-Discretionary Portfolio Management:
   With this approach, the investor maintains all control over his holdings. The function of a portfolio manager is comparable to that of an adviser. With this approach, you make the ultimate investment decision after receiving advice from the portfolio managers. The portfolio managers will operate in your best interest based on your permission. This could take time and effort, especially in the equities markets where you would frequently need to carry out tactical trades to reduce risk.

Benefits of PMS

1. A seasoned and highly qualified fund manager oversees the investment:
   The main advantage of using a professional portfolio management service, or PMS, is knowing that your money is being managed by competent individuals. They are skilled in managing money in a variety of market conditions, including unpredictable ones. As a result, your portfolio would be successfully managed, and their efforts would be directed towards steadily raising your profit margin.
   
2. Customised strategies that fit your objectives and risk profile:
   Your risk tolerance and financial goals are evaluated, and the portfolio managers develop investment strategies that are in line with both of these factors. In contrast, mutual funds manage their funds on a big scale in accordance with the mandate stated in the scheme information document. There is no attempt made to tailor the portfolio to the demands of the investors. However, in the case of PMS, a lot of work is put into screening the investor, understanding their needs, and investing in line with their objectives and preferences.  They keep changing the strategy based on your age, risk tolerance, spending limit, and other factors.
   
3. Effective risk management techniques:
   A portfolio manager’s main goal is to boost profits while lowering the risk associated with your investment. They put a lot of effort into distributing the risk so that you won’t lose money if market trends change. They try to bring in the greatest market chances that will enhance your portfolio. In order to prevent the portfolio from losing a lot of value during such a downturn, efforts are also made to anticipate and realign the portfolio in response to excessive risks in the market.
   
4. Periodic portfolio review and monitoring:
   A portfolio manager will pay special attention to each asset’s performance and the consistent returns generated. Based on current market trends, your investment is modified to help you reach your financial objectives so that you stay committed to the goal of optimising returns at risk-adjusted levels.

Selecting the ideal PMS for you

Here are some guidelines for picking the best PMS for you:

1. The business’s historical performance:
   Examine their prior performance with regard to the performance of their finances. To make sure you provide your money to a business that offers top-notch service, you can also ask previous customers for comments. Additionally, search for a business that has a track record of surviving market adversity. It is significant to highlight that numerous PMS houses were forced to close their doors after failing to weather crises similar to those in 2008. You wouldn’t want to be connected to such a business.
   
2. Analyse the portfolio manager’s experience and knowledge:
   The portfolio manager needs to be well-versed in the market, the most recent investment techniques, and the risks involved. Asking someone who doesn’t understand market policies makes no sense. Before putting your money in the hands of the portfolio manager, inquire about their credentials and prior experience.
   
3.  Read the small print and comprehend the fees and services offered:
   This point cannot be emphasised enough. We frequently neglect to read the small print, blissfully ignorant of the fees associated with any given service. It’s crucial to work with a business that offers the best support.
   
4. Alignment with your personal investment goal:
   The portfolio manager should be motivated to help you achieve your goals. When handling your money, there should be no other agenda. Always seek as much information as you can to understand where and why your money is being invested in a certain plan. Given the abundance of alternatives at hand, investing wisely is crucial.

Questions to consider before joining PMS

Before you sign up, consider the following queries. They will give a more thorough comprehension of the products. Additionally, it will enable you to get the most out of the service being provided.

1. What kind of evaluation and tailoring would be provided to the investor?
   The PMS house should work to offer the best customisation possible. They have to be compatible with your financial objectives and risk/reward profile.
   
2.  What is the fund manager’s overarching investing philosophy?
   The fund manager’s proposed strategy for handling market extremes will be clear from their investing philosophy. It also sheds light on how investments would be examined before being made.
   
3. In the event that the fund manager leaves the organisation, what is the continuity plan?
   One of the most important things to think about is this. The reputation of the fund is frequently built by the fund manager. There are times when the fund suffers when the fund manager leaves. Understanding how the PMS house will handle the changeover from one fund manager to another is crucial.
   
4. Which stock categories and asset classes is the corporation willing to explore investing in?
   This would reveal how extensive their selection is and whether they provide the most recent products on the market. It also provides a sense of how many solutions are available to meet your unique financial objectives and risk tolerance.
   
5. What methods or procedures are used in the research?
   Many PMS firms lack both an effective research staff and suitable screening equipment. To make sure you are getting the most out of your investment, it is essential that you evaluate their capacity in this area. For your investment, a skilled research team and effective tools may work miracles.
   
6. The historical performance of their current funds and their risk management techniques
   If the PMS house has been operating for a while, you should be aware of their historical performance and the risk mitigation techniques they have used to handle crises.
   
7. What pre-screening procedures and balance philosophies do they employ?
   You may estimate the amount of turnover by using pre-screening and rebalancing approaches. A strict and precise pre-screening process might aid in creating a portfolio with a solid base. Rebalancing should be carried out for the advantage of the investor, not the PMS house.
   
8. How do they calculate the fund’s alpha after deducting fees and taxes?
   Any service requires fees and taxes. Always be aware of the amount that applies and how it will be considered when calculating the fund’s returns.
   
9. How is performance benchmarking carried out? Which performance ratios are considered, and why?
   The fund’s benchmark and the performance metrics used to assess the fund should be compliant with industry norms. Spend some time learning about them if you don’t comprehend them so you can decide if they are of interest to you.
   
10. How are liquid assets handled? When should a position be liquidated?
    Even though PMS as a service should be viewed in the long run, there can be times when you need to borrow money. You are always welcome to ask them how the liquidation will be handled. Additionally, you may learn more about the proposed method and standards for eliminating the roles.

How can we assist?

Shivant Equities PMS concentrates on making long-term investments in high-quality, publicly traded Indian firms at fair prices. The portfolio managers’ main goal is to significantly outperform the larger Indian indexes over the course of three to five years.

Shivant Equities PMS plans to concentrate on companies with leading positions in sectors with lengthy runways by drawing on a long history of wealth generation by institutional research teams. By starting the firm early, they hope to provide maximum earnings growth and little attrition. Their investing strategy is based on the complementarities between value and quality. Companies must possess the characteristics that investors value most for long-term growth in order to be considered as viable investments in the portfolio. They also need to be trading below their intrinsic value. The fund manager’s interests are aligned with those of the clients since 95% of the portfolio manager’s net worth is invested in the fund. Shivant Equities’ primary differentiators include several of these elements.

You may always get in touch with one of our financial counsellors to have a thorough conversation about how our service might fit into your overall plan.