Portfolio Management Services (PMS) allow individual investors to have a professionally managed portfolio tailored to their specific investment goals. When investing in PMS, investors own individual securities rather than units of a fund. PMS accounts require a minimum investment of Rs. 5 lacs and charge fees including management charges of 1-3% and sometimes performance fees if returns exceed a threshold. Registered PMS providers in India include Geojit BNP Paribas, ICICI Prudential, and Motilal Oswal.

1. PURTI KAUNDER
ASSIGNMENT FOR INVESTMENT BANKING
ROLL NO. BF15010

2. What is PMS
Portfolio Management Services account is an investment portfolio in
Stocks, Debt and fixed income products managed by a professional
money manager, that can potentially be tailored to meet specific
investment objectives. When you invest in PMS, you own individual
securities unlike a mutual fund investor, who owns units of the entire
fund. You have the freedom and flexibility to tailor your portfolio to
address personal preferences and financial goals. Although portfolio
managers may oversee hundreds of portfolios, your account may be
unique. As per SEBI guidelines, only those entities who are registered
with SEBI for providing PMS services can offer PMS to clients. There is
no separate certification required for selling any PMS product. So this is
case where mis-selling can happen. As per the SEBI guidelines, the
minimum investment required to open a PMS account is Rs. 5 Lacs.
However, different providers have different minimum balance
requirements for different products

3. HOW DOES PMS WORK
• Each PMS account is unique and the valuation and portfolio of each
account may differ from one another. There is no NAV for a PMS scheme;
however the customer will get the valuation of his portfolio on a daily basis
from the PMS provider. Each PMS account is unique from one another.
Every PMS scheme has a model portfolio and all the investments for a
particular investor are done in the Portfolio Management Services on the
basis of model portfolio of the scheme. However the portfolio may differ
from investor to investor. This is because of:
• Entry of investors at different time.
• Difference in amount of investments by the investors
• Redemptions/additional purchase done by investor
• Market scenario – Eg If the model portfolio has investment in Infosys, and
the current view of the Fund Manager on Infosys is “HOLD”(and not “BUY”),
a new investor may not have Infosys in his portfolio.
• Under PMS schemes the fund manager interaction also takes place. The
frequency depends on the size of the client portfolio and the Portfolio
Management Services provider. Bigger the portfolio, frequency of
interaction is more. Generally, the PMS provider arranges for fund manager
interaction on a quarterly/half yearly basis.

4. FEE STRUCTURE FOR PMS
• A PMS charges following fees. The charges are decided at the
time of investment and are vetted by the investor.
• Entry Load – PMS schemes may have an entry load of 3%. It is
charged at the time of buying the PMS only.
• Management Charges – Every Portfolio Management Services
scheme charges Fund Management charges. Fund Management
Charges may vary from 1% to 3% depending upon the PMS provider.
It is charged on a quarterly basis to the PMS account.
• Profit Sharing – Some PMS schemes also have profit sharing
arrangements (in addition to the fixed fees), wherein the provider
charges a certain amount of fees/profit over the stipulated return
generated in the fund. For Eg PMS X has fixed charges of 2% plus a
charge of 20% of fees for return generated above 15% in the year. In
this case if the return generated in the year by the scheme is 25%,
the fees charged by the PMS will be 2% + {(25%-15%)*20%}.

5. SEBI registered PMS in India
• Geojit BNP Paribas
• ICICI Prudential
• Motilal Oswal

6. WHAT ARE MUTUAL FUNDS
• A mutual fund is a pool of money from numerous
investors who wish to save or make money just like
you. Investing in a mutual fund can be a lot easier
than buying and selling individual stocks and
bonds on your own. Investors can sell their shares
when they want.
COMPANIES FOR MUTUAL FUND
 Franklin India Prime Plus Fund
 Invesco India Growth Fund
 SBI Blue Chip Fund
 BNP Paribas Dividend Yield Fund
 L & T Infrastructure Fund

7. FEE STRUCTURE OF MUTUAL FUND
SEBI has recently come out with a circular that
AMCs would be allowed to charge an additional 30
bps of TER on the condition that the new inflows
from beyond top 15 cities are at least 30% of gross
new inflows in the scheme or 15% of the scheme's
AUM (year-to-date), whichever is higher. In other
words, TER may go up to 2.8% instead of 2.5% for
equity schemes. However, the additional TER will be
clawed back if inflows from beyond top 15 cities are
redeemed within a period of one year from the date of
investment. The circular also stated that mutual
funds shall annually set apart at least 2 bps on daily
net assets within maximum limit of TER for investor
education / awareness initiatives.

8. WHAT ARE AIF’S
• An investment that is not one of the three
traditional asset types (stocks, bonds and
cash). Most alternative investment assets
are held by institutional investors or
accredited, high-net-worth individuals
because of their complex nature, limited
regulations and relative lack of liquidity.
Alternative investments include hedge
funds, managed futures, real estate,
commodities and derivatives contracts.

9. TYPES OF AIF’s
• Category I AIF are those AIFs with positive spillover effects
on the economy, for which certain incentives or concessions
might be considered by SEBI or Government of India; Such
funds generally invests in start-ups or early stage ventures or
social ventures or SMEs or infrastructure or other sectors or
areas which the government or regulators consider as socially
or economically desirable. They cannot engage in any leverage
except for meeting temporary funding requirements for not
more than thirty days, on not more than four occasions in a
year and not more than ten percent of the corpus.eg. Venture
Capital Funds, SME Funds, Social Venture Funds and
Infrastructure Funds. Giving effect to the announcement by
Union Finance Minister on angel investor pools in the Union
Budget 2013-14, SEBI in June 2013 has approved a
framework for registration and regulation of angel pools
under a sub- category called 'Angel Funds' under Category I-
Venture Capital Funds.

10. TYPES OF AIF contd..
• Category II AIF are those AIFs for which no specific incentives or
concessions are given. They do not undertake leverage or
borrowing other than to meet the permitted day to day
operational requirements, as is specified for Category I AIFs. eg.
Private Equity or debt fund.
• Category III AIF are funds that are considered to have some
potential negative externalities in certain situations and which
undertake leverage to a great extent; These funds trade with a
view to make short term returns. These funds are allowed to
invest in Cateogy I and II AIFsalso. They receive no specific
incentives or concessions from the government or any other
Regulator.eg. Hedge Funds (which employs diverse or complex
trading strategies and invests and trades in securities having
diverse risks or complex products including listed and unlisted
derivatives).

11. AIF’s
 Category I
 Aavishkaar India Micro Venture Capital Fund
 Adharshila Venture Capital Fund
 Aditya Birla Private Equity Trust
 Category II
 ACA Private Equity Trust
 Aditya Birla Private Equity Trust
 Ashmore Centum India Recap Fund
 Category III
 Karvy Capital Ltd
 Edelweiss
 Malabar Capital