PMS or Portfolio Management Service is a professional service where qualified and experienced portfolio managers backed by a research team manage equity portfolios on behalf of clients instead of clients managing it themselves. India being one of the oldest stock market ecosystems, the direct equity investing cult has been prevalent for decades.
There are a large number of investors who own equity portfolios in their demat accounts that they manage based either on their own experiences or with inputs from broking companies and equity advisors. PMS is an investment service offered by a portfolio manager whereby its investors get the flexibility to tailor a portfolio, according to personal preferences and their financial goals.
Here are the different types of Portfolio Management Service.
The active portfolio manager aims to make better returns than the overall markets i.e. to generate Alpha. Higher returns would involve higher than normal risk in the strategies and therefore, the portfolio manager tries to downsize the risk by diversifying its investments.
Exactly opposite to the previous type is the Passive style of portfolio management. Passive management is an investing strategy that tracks a market-weighted index or portfolio. The portfolio manager generally experiments with the Index funds with lower turnover.
A discretionary manager is given full flexibility to make decisions for the investor. While the individual goals, risk appetite and time-frame are taken into consideration, the manager adopts the appropriate strategy which he thinks is the best suiting the investment policy statement.
The non-discretionary manager is more like an advisor than a portfolio manager himself. He advises the investor in which routes are best to take. The risks and rewards are cleared mentioned in the advisory note while the discretion to take action is totally with the investor.
