The markets regulator is paying a close attention to investments by large portfolio management service (PMS) providers – i.e., arms of brokerages and asset managers which handle the money of wealthy and ultra-rich, reported The Economic Times.
The Sebi asked some of them to disclose details related to various schemes as on February 28, 2022 and compare the portfolios of clients within an investment theme such as long only, high growth etc.
“The regulator didn’t say why it wants the information. But the PMS houses told to submit within a day,” said a compliance official with a fund house, wrote Economic Times.
The information sought by SEBI include details of assets under management and number of clients under discretionary PMS, non-discretionary PMS and advisory PMS, investment approach wise details of number of clients and AUM, AUM and details of clients who are not covered under any investment approach and extent of overlap in portfolio of each client under the same approach.
A large number of high networth individuals choose to put a slice of their money in PMS schemes and alternative investment funds (AIFs) such as private equity and venture capital outfits.
In discretionary portfolio management service, the portfolio manager manages the funds and securities of each client in accordance with the needs of the clients while under non-discretionary the portfolio manager manages the funds in accordance with the directions of the client.
“Sebi appears to be looking at the strategies being followed by PMS providers...Some PMS providers follow a model portfolio while some also offer a customised portfolio depending on the appetite of investors. Now, portfolio of two clients under the same theme may differ even if they have a similar risk profile,” said an official with a financial intermediary.
Nearly three months ago, the market regulator asked all PMS forms to share the quantum of various securities bought by different kinds of clients.
Many in the industry felt that SEBI could be considering raising the minimum investment amount or tightening reporting standards.
The minimum investment in a PMS is ₹50 lakh raised from ₹25 lakh in end 2019.
Apart from charging a fee of 1.5-2 percent from clients, most PMS companies collect a carry of 20 percent which is the share of the gain if the portfolio outperforms a benchmark index.