High Risk, High Reward

ALTHOUGH PMS PLANS PERFORM BETTER THAN MUTUAL FUNDS IN THE LONG RUN, INVESTORS MUST BE AWARE OF THE RISKS INVOLVED

- APRAJITA SHARMA

Portfolio management services (PMS), which offer tailor-made portfolios, have been a preferred choice of high net worth individuals (HNIs) and ultra HNIs for quite a few years now. With deep pockets and high risk-taking ability, these investors hunt for index-beating alpha (a measure of return above index). While promise of good returns and personal attention from portfolio managers are a big draw for HNIs, they must be aware about the risks involved in PMS, apart from the new rules that have come out to make these investments safer for investors.

Recent Regulations

According to the working group on SEBI (Portfolio Managers) Regulations, 1993, assets under management of portfolio managers grew from ₹4.7 lakh crore in February 2012 to ₹18.07 lakh crore in April 2019 (over 70 per cent is contributed by funds from EPFO/PFs). The number of clients rose from 82,391 in February 2012 to 151,618 by April 2019.