How Does A PMS House Function?

A prominent question in an investor’s mind is – How does a PMS house function? And before we answer this question, you must understand a few things about PMS. Let’s begin with the meaning of PMS.

Portfolio Management Services is a facility extended by PMS Companies to assist a High Net-worth Individual (HNI) in building a portfolio with financial securities that align with their financial goals and have the least risk involved by considering the PMS investment risk.

The minimum investment in PMS is set at ₹50 lakhs by SEBI, which regulates the industry. The companies are mandated to follow the Portfolio Management Services SEBI regulations. 

Many clients are attracted to this service as Portfolio Management Services returns are higher than other investment segments.

Once all these things are clear, you must be wondering about one more thing – How does a PMS House function, right?

So, let’s begin!

PMS House Function

A PMS house hires fund managers and fund advisors to facilitate the clients according to their requirements. Clients get to choose from multiple PMS Strategies so that they can meet their financial goals in a designated time.

The PMS house hired fund managers, and the investor enters into a detailed investment agreement, which includes details like goals, strategy, and risk appetite.

The investor is expected to pay the amount (₹50 lakhs) or stocks worth that amount.

The PMS in portfolio investment is similar to having a tempered glass on your phone screen. The impact of market fall is reduced by subscribing to PMS. It happens due to the expertise of a fund manager.

A more diversified and well-managed portfolio is set to protect the investments of the client marginally.

Since there is a minimum investment amount, investors from lower-income profiles are safeguarded against the PMS investment risk. This point is advantageous and disadvantageous simultaneously.

The next aspect in answer to the question – How does a PMS house function is the cost bearing of the company.

The fund managers charge asset management fees. This fee is directly proportional to the investment amount. Generally, it lies between 2% – 2.5% of the investment.

Some of the Portfolio management service houses place an extra PMS charge according to the profit margin of the client.

This charge is separate from the fees mentioned earlier. Additionally, the brokerage charge for every transaction is borne by the client. At times, this additional cost eats up the profits and impacts the PMS returns.

Lastly, no PMS house can ever guarantee you outstanding performance. They try to maximize the profit and reduce the risk but can never eliminate it. The company is only a party to the profits and not the losses.

The client entirely bears the losses. The investors have a clear understanding of this phenomenon, and thus HNIs are allowed to invest in PMS.

With all these aspects combined, the PMS house also has to comply with the PMS SEBI rules updated now and then.

Once you are aware of the PMS House Functioning, go through the Best PMS In India and choose the one according to your requirement.

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Conclusion

The question of how does a PMS house function is necessary as an investor must be aware of the activities that lead to the working of an institution he is going to invest with.

We hope this answer cleared your doubt about portfolio management services.

Happy investing!

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