Customised for HNIs

MASS PRODUCTS SUCH AS MUTUAL FUNDS DO NOT WORK FOR THE VERY RICH. WELCOME TO THE WORLD OF PORTFOLIO MANAGEMENT SERVICES AND ALTERNATIVE INVESTMENT FUNDS

- NAVEEN KUMAR

The mutual fund (MF) space has grown significantly in the past two decades. However, being a mass product, MFs follow the law of averages when it comes to risk and returns. This works for retail investors but fails to meet the risk and return objectives of high net worth individuals (HNIs).

This is where portfolio management services (PMS) and alternative investment funds (AIFs) come into the picture. “MFs are standardised schemes with a lot of investment restrictions. PMS and AIF offer more flexibility,” says Rahul Jain, Head, Edelweiss Wealth Management. The recent rigid classification of MFs by Sebi has made it worse.

“PMS managers construct a focused, client-centric portfolio with fewer high-conviction stocks having healthy earnings visibility, quality balance sheets and business leadership,” says Rajesh Cheruvu, CIO, Validus Wealth.

PMS returns

Most PMS plans get their returns from equity markets, they cannot remain completely insulated from significant developments in the market. Concentration of stocks generates superior returns in normal course. However, it can be risky in case of a broader market correction like the one at the beginning of the year which eroded wealth of most equity investors. The good part is that it was followed by an equally impressive recovery in subsequent months. “The recovery has been fast. The deluge of global liquidity created by governments and central banks has found its way into various assets, including equities, gold and bonds. Equity markets are placed as if Covid never happened, erasing the losses suffered in February and March,” says Unmesh Kulkarni, Managing Director, Senior Advisor, Julius Baer India.