PMS Isn't For The Uber Rich Alone

Jaimit Bhatt had always thought that wealth management and advice from leading financial services companies was for someone like his rich and illustrious neighbour Vikram Garg, who had inherited a huge family fortune. But, his outlook to life changed last Friday, when his old and trusted financial advisor Ramanbhai (name changed) called him seeking an appointment.

The appointment granted, and the meeting concluded, Bhatt was suddenly exposed to an entirely new world of products. He had heard of them earlier, but never thought he had the wherewithal to invest in them.

Ramanbhai explained that portfolio management services (PMS) divisions of some local broking firms were now offering a set of alternate investment avenues for the rich, unlike the foreign private banks and wealth managers who only targeted the uber-rich.

Bhatt was told that PMS was changing tack to include, apart from equity, asset classes such as real estate and gold and some customised advice.

Over the discourse, Bhatt realised that HDFC Asset Management's PMS division was launching a fund that would invest in unlisted companies in the real estate sector. The minimum ticket size for the investment - Rs 25 lakh. Till now, Bhatt had thought such a fund was floated only by private equity players with an interest in the unlisted real estate space.

And these players normally garnered their funds from uber-rich individuals or institutions that had more than a few crores of rupees to spare.

ICICI Prudential's PMS division had also launched such a real estate fund early this year, managing to mop up around Rs 900-1,000 crore. According to Ramanbhai's sources, the fund house is on the verge of launching a 3-year product, with gold as the underlying asset, under its PMS division.

All this meant that with a sum of Rs 25 lakh or less, Bhatt could now invest in these asset classes, which were the exclusive preserve of the obscenely-moneyed class till very recently.

"PMS is now exploiting alternate investment classes to equity. Mutual funds do not allow that (except debt) and private banks offer them only to the uber-rich. So there is a need to launch such products for those who do not have crores to part with, yet have the appetite and resources to get into them," said Yogesh Kalwani, senior vice-president, product development at Motilal Oswal Securities.

In fact, Motilal Oswal has just launched a product called the Next Trillion Dollar Opportunity Portfolio. Though focused on equity - of small and mid-cap companies that have the potential to grow - the product's unique selling proposition is that it is available at a minimum investment size of Rs 5 lakh.

Meanwhile, the PMS division of Emkay, another local broking firm, has started charging clients only for advice. This is a departure from discretionary and non-discretionary PMS, where the client normally trades using the platform provided by the broker offering advice.

Discretionary PMS means the client's portfolio is constructed at the discretion of the fund manager, while in non-discretionary PMS, the client decides his portfolio mix, using advice from his PMS provider and executing his trades through him.

Akhilesh Singh, business head of PMS at Emkay, said, "Through this product, we are telling the client to execute his deals through any broker. We will only provide him advice on when to get into a stock, the potential of that, and when to exit." And the client pays for this advice, at Rs 25,000 every quarter.

But, others think this kind of a product may not work over the long run.

Ajay Padval, vice-president of PMS at KR Choksey Securities said, "We consider PMS a very personalised and aspirational service. Therefore, we wouldn't want to advise a client without knowing his risk profile and his investment needs." He probably meant that it's better to call such a product "market tips" rather than PMS.

All the same, with PMS players fighting for marketshare by introducing new products, offering newer asset classes and making this aspirational service more affordable, things are only going to look better for a client like Bhatt.