FROM CUSTOM PORTFOLIOS TO HIGHER TAXES: THE REALITIES OF INVESTING VIA PMS

Those who plan to invest in stocks and bonds through a portfolio management service should be aware of its salient aspects and how a PMS is different from mutual funds and alternative investment funds.

- JOYDEEP SEN

Here are the key features of investing through a PMS.

A provider of portfolio management services (PMS) doesn't operate as a mutual fund or alternative investment fund would, managing a pool of money for investments in shares and bonds. Instead, each PMS portfolio should be unique as it is supposedly curated by the provider for the client/investor. However, it is not possible to run exclusive portfolios for each investor. That would involve tracking too many stocks and bonds as well as many different portfolio:

What PMS providers do is run a model portfolio and replicate it for all clients. Individual client portfolios may vary from the model, but only marginally. In that sense, it operates like a fund with a manager investing a client's money in stocks or bonds as per the mandate and runs similar portfolios for all investors.