PORTFOLIO MANAGEMENT SERVICES
INSTITUTE OF MANAGEMENT STUDIES
MBA (FA) 2008-2010
Major Research Project
On ANALYSIS OF RISK MANAGEMENT THROUGH PORTFOLIO MANAGEMENT SERVICES
Submitted To :Prof. Vivek Sharma
Submitted By:Rahul Thakuria
I deeply appreciate the highly professional and logical approach taken by all with whom I interacted with different professionals in HDFC, Kotak Securities, Emkay Stock Broking, Arihant Capital Market and Franklin Templeton for the accomplishment of my project.
A special note of thanks to all who decided to engage me in this project.
I record my appreciation to Mr. Kanchan Sharma of Emkay Stock Broking, Mr. Avanish Tiwari of HDFC Bank, Mr. Shidhart of Arihant Capital & Mr. Nitin of Kotak Securities for providing me the relevant information and invaluable guidance that can never be forgotten by me. I would like to thanks them for supporting me and helping me throughout the project.
I would like to extend my thanks to Prof. Manish Kant Arya ( HOD) and my faculty guide (mentor) Prof. Vivek Sharma without whose help it would have been very difficult for me to complete this project.
Last but not the least, I would like to express my thanks to all my colleagues and my family members who inspired me to put in my best efforts for this project. 3
This is to certify that Mr. Rahul Thakuria, a student of MBA (FA) 4 th semester from Institute of Management Studies has completed his Major Research Project base on Analysis of Risk Management through Portfolio Management Services under my guidance.
This report is being submitted in partial fulfillment for the award of Master of Business Administration in Financial Administration. His work throughout the project was up to my satisfaction. I wish him all the best for his future.
Signature of Guide:
Scope & Limitation.TABLE OF CONTENTS
Page No. Abstract
Sources & Method Introduction to Investment • • • • Why should one invest? When to Invest? How much money required to invest? Where can I invest?
About Portfolio Management Services
• • •
Introduction Why PMS? Benefits by PMS 5
Discretionary V/s Non Discretionary PMS PMS V/s Mutual Fund
Introduction & Analysis of PMS of major players
• • •
HDFC Kotak Securities Franklin Templeton
Information about other players –
• • •
Emkay Stock Broking Arihant Capital Market IL & FS
Portfolio Management Services (PMS).References
Smart Investment is essential to get good return on their hand earned money.
The project covers one of such smart investment avenues. Every one wants to invest their savings for uncertain future ahead. 7
. Proper knowledge can help an investor to get maximum possible return while minimizing his risks.
Returns. The investment should be smart enough so that the principal is safe.
Fee Structure. With the globalization of Indian financial market lot of investment has opened up. provided by HDFC AMC and seeks to compare it with PMS provided by other Asset Management Companies on the basis following parameters:
Transparency in the System. With the increase in number of options now available complexity too has increased. returns are maximized and liquidity is available.
• FRANKLIN TEMPLETON.•
Lock in Periods. The project has also covered information about the investment options in debt market which have petty low risk and assured but low returns.
The project cover detailed information about a Discretionary Portfolio Management Services and a comparative analysis of PMS provided by HDFC AMC with PMS provided by other major player in the market & it will also help to analyze the “ How Risk is Being managed by using prominent tool PMS”.
• ARIHANT CAPITAL MARKET LTD.
The key focus of the project is to have better insight into investment in equities market and related instruments like Portfolio Management Services (PMS).
I choose the following companies for understanding the risk management techniques & Portfolio Management Services as a means to diversify the risk :
• HDFC SECURITIES (AMC)
• EMKAY STOCK BROKING COMPANY.
• KOTAK SECURITIES.
Since I also collected some primary data by meeting up with different people in different organization there are chances that the data may be manipulated.PURPOSE
The main objective of my study was to analyze the risk and how does it managed by comparing HDFC AMC PMS with other such PMS in the market so as to know its position in the market. It is very important to know about the competitor’s product if you want to be the leader in the market. The study has brought a clear picture where HDFC is in comparison to its competitors. According this will help to analyze the risk and how is it being managed by only means of PMS.
Data regarding the break up of the portfolio was not available as it considered confidential by different people of the organization
Limitation of the Study :-
There are following major limitations of my studies:
Since there are so many players in this field it was not possible to collect the data of each and every one therefore I have compared it with top ten players in the market of Portfolio Management Services.
Therefore a person has to sure that his money is going into right hands.
The primary data is very useful as it brought about a true picture about their PMS.Methods of collecting data
The data pertaining to the study is a mixture of both secondary data collected from the website of different PMS provider.
Why should one Invest?
Managing money has always been difficult. is opening up to the global competition with the advent of liberalization. and unless the investments are large it might also turnout to be expensive trying set up your own investment wings. depository settlement clearing system and trade guarantees . believe in the system. it has a very vibrant capital market. which have made them . It might be prudent asking a professional to manage your funds for a small fee. It requires a great deal of expertise to evaluate various saving and investment plans. Since people are busy they don’t have the time to do it themselves. the world’s largest democracy. It has the largest middle-class population in the world having substantial purchasing and investing power. the presentation which where forwarded by the people working there and the primary data which I collected by meeting up with the people working there. Capital market in India are continuously upgrading and currently offer electronic trading. As a result.
INTRODUCTION TO INVESTMENT
Invest for long term and not for short term. The earlier one starts investing and continues to do so consistently the more money will be made. Considering the unpredictability of the markets. To invest. Also it’s exciting to review investment returns and to see how they are accumulating at a faster rate than salary or any other source of regular income. better standard of living or to just pass on the money to the next generation. If he is not in the habit of saving sufficient amount every month. marriage. vacations. There is always a first time for everything so also for investing. one need capital free of any obligation.
When to Invest?
By investing into the market right away allows investments more time to grow. Invest regularly. research and history indicates these three golden rules for all investors. then he is not ready for investing. The power of compounding is one of the most compelling reasons for investing as soon as possible. leaving him with a nice surplus over a period of time.
Invest early.Simply put. 11
. college fees. 2. one should invest so that his money grows and shields him against rising inflation.
Trust in the power of compounding is growth via reinvestment of returns earned on savings. mutual funds or certificate of deposit (COD) or any other assets. the faster the money will grow. the end result is to create wealth for retirement. The longer the money remains invested and the higher the interest rates. 3. whereby the concept of compounding interest swells income by accumulating earnings and dividends. Compounding has a snowballing effect because one earns income not only on the original investment but also on the reinvestment of returns accumulated over the years.
Whether money is invested in stocks. The rate of return on investment should be greater than the rate of inflation.
INTRODUCTION TO PORTFOLIO MANAGEMENT SERVICES (PMS)
What does it mean?
Based on the Risk Appetite and Risk Exception of the investor. to match our expectations of safety. Time horizon of investment.
Why PMS? 12
. The amount that should be invested will eventually depend on factors such as:
• • •
Investor’s risk profile. return and liquidity. the fund houses designs and develops a personalized investment plan. Savings made. Our account is always managed the way we want and our investment does not get lost in a crowd as in the case of most mutual funds. The Portfolio Management Services.How much money is needed to invest? There is no statutory amount that an investor needs to invest in order to generate adequate returns from his savings.
viz Equity and Cash.
PMS offers a higher level of information and investors can receive :
Communications that include relevant information on major market events. we want
A Portfolio comprising of select ideas.
Efficient allocation among assets.
PMS portfolio combines the benefits of professional money management with the flexibility.As a discerning investor. Investors can choose a variable fee structure that is dependent on the performance of the portfolio.
Ability to take focused bets both in stocks and sectors. PMS offerings have attractive fee structures. Quarterly performance updates. 13
Mutual funds as an investment vehicle are structured to reduce risks as far as possible. who understands the risk-reward ratio. as they cater to thousands of investors. control and potential tax advantages of owning individual stocks or other securities.
Competitive and Flexible Fee Structure
As the costs of garnering assets are typically lower.
. But a fund gives them identical portfolios.Customization
• • •
More choice in terms of portfolios to suit individual client needs and risk appetite.
High Service Standards
• • •
Total transparency of the portfolio.
a. Access to the portfolio management team. yuppie fast-moving stocks. More information will lead to informed decision making. Alternate investment products that was traditionally available to the very wealthy.
What are the Benefits available to the investors from Risk Diversification.
Unlike an equity fund PMS tailors a portfolio to an individual’s needs. Ability to structure products that meet specific investment objectives. Such nuances are bettered captured and serviced continuously by a PMS.” Clients have different life circumstances and risk-reward profiles. There might be a possibility that “A retired person might want blue chips.
Mostly they charge an annual flat fee was 3 – 4 %. which does not partake character of a Mutual Fund. the schemes on offers are mostly discretionary in nature.
The good PMS providers operate on similar lines as funds. performance. transaction details and tax liability-online.
b. even get into specifics.Most portfolio managers aim to generate long-term returns. their management fee compares well with that of funds. Although portfolio managers call the shots. Return guarantees are illegal. Most offer a choice between a fixed fee structure (flat fee on portfolio value) and a profitsharing structure (lower flat fee plus share of gains). with the choice of stocks and investing life style-aggressive or buy-and hold being driven by an investor’s risk preferences. with which one can access portfolio details like list of Shares.
c. Stocks selection is the prerogative of the portfolio managers. they are willing to sit and explain the philosophy behind portfolio. whereas the non-discretionary portfolio manager manages the funds in accordance with the directions of the client. They have a strong research setup. which is what equity fund typically charge. And for all the personal attention they give you.
Most entities give a client ID and Password.
Discretionary portfolio Vs non.Discretionary portfolio
In the discretionary portfolio manager individually and independently managers the funds of each client in accordance with the needs of the client in a manner.
. There is also diversify in product offerings. Due to the profit sharing structure.
COM f) MOTILAL OSWAL. g) IL&FS h) FRANKLIN TEMPLETON. which is automatic in a mutual fund. d) KOTAK SECURITIES LTD.PMS Vs Mutual Funds
a) The client has control over the asset allocation. c) The client has access to the Portfolio Manager. b) The portfolio can be customized to suit the client’s risk return profile. d) The Portfolio Manager has the flexibility to move into cash as and when required. e) INDIAINFOLINE/ 5PAISA.
The Major players in the market providing Portfolio Management Services (PMS) are as follows:
a) HDFC AMC b) EMKAY STOCK BROKING c) ARIHANT CAPITAL MARKET. 16
. Which is not possible in a Mutual Fund.
BRIEF INTODUCTION OF THE PLAYERS UNDER STUDY
The HDFC GROUP
HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for heir housing needs.i) RELIANCE. j) WAY2WEALTH k) ICICI PRU.
. HDFC was promoted with an initial share capital of 100 million.
but also understand the associated risk.
The PMS is targeted to investors who want to improve their current approach to equity investment.The Primary Objective of HFDC is to enhance residential housing sector stock in the country through the provision of housing finance in a systematic and professional manner.
HDFC’s main goals are to:
a) Develop close relationship with individual households. b) Maintain its position as the premier housing finance institution in the country. Whatever is their investment approach viz. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial market. It calls for awareness and understanding of the business and economic variables that affect equity valuation. c) Transform ideas into viable and creative solutions. and to promote home ownership. e) To grow through diversification by leveraging off the existing client base. active.
The AMC being in the investment business is better equipped to understand these variables. It is clears that equity investment has become a more involved activity.
HDFC AMC PMS
Under the Portfolio Management Services (PMS). research based or otherwise. HDFC Asset Management Company limited (AMC) offers investment management and advisory services to individuals who not only understand the longterm potential of equities as an asset class.
. d) Provide consistency high return to shareholders and.
More than 50 years of experience in global investing. by virtue of his smaller portfolio size may exploit such opportunities.The PMS will also give an opportunity to investors to interact with its investment team. However attention is also drawn to the fact that in many cases.
To invest in companies in strong businesses. This may enables investors to gain insights into the investment process and better understand the performance of their portfolio.
HDFC AMC proposes to take advantage of these opportunities and attempts to meet the investment objectives of the investors. regulatory investment restrictions etc. However. Over US $ 550.
. for example.9 billion assets under management: over 15 million investors account world wide. liquidity.
3. The investors. highly illiquid equities also are more volatile than more liquid securities.
1. several issues restrict large equity mutual funds from acquiring sizeable positions in companies that otherwise satisfy the above-mentioned criteria. run by competent managers and available at a price that represents a discount to the intrinsic value of that business. First and only mutual fund company added to the S&P 500.
. Monitoring against benchmarks.4. 3. Search for stocks out of favor and ignored by the market due to short-term negatives. 3. b. Though their investment style has an inherent growth bias they are not limited by external style classifications. 4. is agile and adapts/ position them well for the future. 2. Best global risk practices a.
Franklin Templeton – India
Portfolio Management services utilizes 1. Value is created by innovative management who is focused on the right businesses. 5. Attribution analysis of performance. Similarity in Investment philosophy/style. 4. Deep search for business and management creating wealth. 2. Access to global research that helps in identifying macro trends. Strong in-house research database built over a decade. Their investment style can be described as bottom-up. research based and dynamic ‘blend’ of growth and value.
1. some of which could even be in out of favor sectors. Focus on individual companies and the wealth they are creating for their shareholders. Fourth Largest US mutual Fund family by long term assets under management.
Kotak Securities is one of the largest broking houses in India with wide geographical reach. 4. Its operations include tock broking and distribution of various financial products . Depository Services. is the stock broking and distribution arm of the Kotak Mahindra Group. Currently. The company was set up in 1994. Institutional Equities. The company has four main areas of business:
1. Its expertise in research and stock broking gives the company the right perspective from which to provide its clients with investment advisory services.
Kotak Securities Portfolio Management services
This division provides professional portfolio management services to High Net-worth Individuals (HNI) and corporate.including private and secondary placement of debt and equity and Mutual Funds. 2.
Why portfolio Management with Kotak Securities?
Leverage on the proven track record of our experienced Portfolio Managers 21
. Kotak Securities is a corporate member of both The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) of India limited.KOTAK SECURITIES LIMITED
Kotak Securities limited. a subsidiary of Kotak Mahindra Bank. Portfolio Management Services. Retail ( equities and other financial products ) 3.
meticulously monitoring and assessing it at every level. adopt predominantly a buy & hold approach & attempt to balance investment risk through deep understanding of businesses.Their Portfolio managers have ten years of extensive experience in the investment world. To select portfolio that would adopt a bottom – up approach to stock selection. he then devises a suitable investment portfolio for us in a phased manner. • In Depth research that powers cutting edge expertise
The research team provides Portfolio Managers with incisive insights to enable him seize every business opportunity that can enhance ones portfolio.
Get your own Relationship Manager
A skilled professional with invaluable experience in this domain.
To follow aggressive & concentrated investment approach in Equities. with in depth understanding of diverse investment instruments.
KOTAK SECURITIES offer PMS named as INFINITY. which is a Discretionary Portfolio Management Services.
INVESTMENT APPROACH 22
Capitalize on changing economic trends. 2.•
Bottom-Up approach for identifying investment ideas.
Concentrated but Diversified investment approach.
COMPARATIVE STUDY BASED ON DIFFERENT PARAMETERS
Identifying new investment themes. Entry timing for individual script’s and portfolio construction in a phased manner. 3.
Looking for superior growth companies.
Benefits to the Clients
Spot asset play opportunities. No time involvement from the client side as e gets back the returns. Experienced and dedicated research team.
with the stocks representing Franklin Templeton’s investment ideas at any given point in time. A balance of stocks in the portfolio will range from 15-18. 2.
The AMC will spend considerable time understanding the specific investment objectives of each investor and attempt to design a portfolio that may facilitate to achieve the objectives of the investor. Single stock exposure limited to 15 % o Appropriate balance between diversification & concentration. o A balance between diversification and focused approach. The analysis of performance will also include comparative parameters.
It has got two unique products. 24
.1. The portfolio provided by the HDFC will be customized. They are FT select and FT opportunities
FT Select 1.
Transparency In the System
a. Key Features
The investor in HDFC PMS will have exclusive ownership of his/her portfolio and will received a periodic update on its performance.
Invest across various size segments o Apart from stable. Top 10 Stock amount to 75 % of the portfolio. entrepreneurial ventures.
2. strong long-term businesses.
1.3. o Above average concentration. sector to 30% o Appropriate balance between diversification & concentration. Business risk will be mitigated through adequate diversification.
4. o Ability to wait for a good investment idea
Two Portfolio Choices 25
. Flexible cash location. Single Stock exposure limited to 15%. Number of stocks in the portfolio will range from 25-30 o Stocks representing new growth opportunities. Flexible Cash Allocation o Ability to wait for a good investment idea. innovative products/services. etc will be given priority at any given point of time. o Investment Approach not boxed into mid caps style. emphasis on emerging trends as well.
o Lower portfolio turnover.
INFINITY 1. logistics management are all taken 26
. care by Kotak. emerging businesses etc. o Higher risk by taking exposures to new ideas. o 70 % large cap (> 1500 crores) o Least exposure to un-tested management. o Focus on long term wealth generators. Investments are made in the chosen stock by the fund management at The investment. Etc o High Concentration but low liquidity risk. o Benchmark: S & P CNX 500.
FT Opportunity o Exposure to large. Kotak.FT Select
o 15-18 Best Ideas. o Benchmark: BSE sensex. medium and small cap ideas. market timing. o Low concentration but higher investment & liquidity risk. new buz. turn-around plays. 2.
Maximum of 20-25 stocks are kept the ratio of 7:3 in frontline and
• • • • • • •
Mix of business from various sectors. Concentrated portfolio of 10-15 Stocks. Mix of growth and value stocks. The investment are made and held in the name of clients by the power of attorney given by the clients. Businesses out of favor but offering value.3. Turnaround companies. Super growth businesses in nascent stages. not necessarily mid cap stocks. mid-cap.
Information at fingertips 27
. 4. Business restructuring / reforms led companies.
as well as Market and portfolio Performance.
Interaction with the Investment Team • Regular updates on the investment strategy and market views personally from the Franklin Templeton PROWESS Investment Team.a. overviews prepared by the PROWESS Investment Team. 2. 6. or 28
. Fee Structure HDFC AMC There are two option provided by the HDFC: 1. Access to all research reports. Performance Analysis and more. Realized Profit/loss statement for Tax Purposes. 3.
II. Dedicated Website to view PMS performance. A fixed fee of 2. Portfolio Transaction List. Portfolio Statement.5% p.•
Quarterly market update. of the weighted average portfolio value. 4. Quarterly Account Performance Statement. payable proportionately at the end of every calendar quarter of a financial year.
KOTAK. Toll free Numbers 5.INFINITY 1. Separate central Desk for Customer Services.
Web Access • Access to portfolio 24 x 7 download Investment summary.
5% p.04% (Min 5/. for FT opportunities.5 % P.a. while 1. etc are as per actual.pt: Max 10/-) 4. Further the fees are variable to the extent of additional returns. Audit fees : Re 5000 /6.2.25 % (included in the cost of assets ) 5. of the weighted average portfolio value. Transaction charges – Buy or sell : 0. Depository charges : For Buy Transactions NSDL and CDSL: NIL For Sell Transactions on NSDL: Rs 10 per transaction 3. 2. For NRI Investors additional bank charges are as per bank schedule.5 % p. 29
. 2) On the returns the fee is charged above 12% in the profit sharing ratio of 80 : 20. Safe custody charges: 0. of the value of the holdings. payable as above PLUS 20% share in the gains above 10 % p. Brokerage Charged by brokers : 0.a. 7.
0.07 % p.a.
A fixed fee of 1.5 % p.a.a. Any other out of pocket expenses like service tax.A.
1) FT select charges a management fees flat 2.
25 79. 11 May)
FT Select ( in %) 30
Last 1 Year Last 2 Year Last 3 Year Since inception (i.Return Based Fees
Above 5% Profit Sharing at the ratio of 75:25
0.58 42.25 48. Performance
As on Dec 31 2009
Portfolio Return (in %)
Last 3 months Last 6 “
III.22 68.e.25 62.
.87 46.01 73.01 68.99
As on Dec 31 2009
Portfolio Infinity(in %)
Last 3 months Last 6 months Last 1 year Last 2 year Last 3 Year Since inception
17.Last 3 months Last 6 months Last 1 year Last 2 Year Last 3 Year Since inception (19 June 2003)
iv.67 42.03 82.99 73.87 48.60 48.09 42.
Investments in securities are subject to market risks.
Lock In Period
For all the three players undertaken for study. Past performance of the sponsor and its affiliates/ mutual fund/ AMC does not indicate the future performance of the portfolio manager and its schemes. the better it is i.
VI. but one of the factors.e. Investors are urged to read the disclosure Documents before signing the agreement. which affect the minimum investments. Thus from the above statement it is clear that more the investment limit.
HDFC AMC Investors are not being offered any guaranteed / assured returns. which decide this parameter for the PMS. then this specified service can be effectively used. the placement of funds or securities is for a minimum period of one year.
FRANKLIN TEMPLETON 32
. Another factor which affects it is geographical location where PMS is offered. The value of investments may go up or down depending on the various factors and forces affecting the capital markets. of high net worth customers and their investment plan.HDFC AMC 1 Crores
Franklin Templeton 50 Lakh
Kotak Security 10 Lakh
Though every bank has different factors. is the no.
Limited liquidity in the market.FT Select 1. it is important to note that mid/small cap stocks can be riskier and more volatile on a relative basis. Therefore. Mis-judgment by the portfolio Manager or his incapacitation due to any reason however remote is also a risk. Investment will be of a longer duration compared to trading in securities. There is a possibility of the value of investment and the income there from falling as well as rising depending upon the market situation.
2.performance of a third party. include default or non. Such loss could arise due to factors which by way of illustration.
2. The top ten stocks in this scheme may account for about 75% of the portfolio. And it is important to note that generally. the risk levels of investing in small cap and mid cap stocks is more than investing in stocks of large well-established companies. impeding readjustment of portfolio composition.
1. There could also be a concentration in a few industries. While mid cap & small cap stocks give one opportunity to go beyond the usual large blue chip stocks and present possible higher capital appreciation. There is also risk of total loss of value of an asset. The small cap stocks carries liquidity risk as they are less extensively researched compared to large cap stocks. The Portfolio manager will invest in large capital stocks. disputes raised by third parties. Please note that over a time these three categories have demonstrated different levels of volatility and investment returns. This may lead to abnormal liquidity and consequent higher impact cost. Thus the investment in Indian Capital market involves above average risk for investors compared with other types of investment opportunities.
. possibilities of recovery of loss in investments only through expensive legal process. settlement risk.
3. highly volatile stock market in India. The concentration of the portfolio in a few stocks/ industries increases the risk and could lead to a greater volatility in the performance of the scheme as compared to the performance of other schemes. The portfolio of this scheme will be concentrated in fifteen to eighteen stocks. company’s refusal to register a security due to legal stay or otherwise. no one class consistently outperforms the others.
3. disputes raised by third parties. Thus the investment in Indian Capital Market involves above average risk for investors compared with other types of investment opportunities. There is a possibility of the value of investment and the income there from falling as well as rising depending upon the market situation. Limited liquidity in the market. There is also a risk of total loss of vale of an asset. impeding readjustment of portfolio composition. company’s refusal to register a security due to legal stay or otherwise. Efforts would be made to keep the average liquidation period under prudent limits prescribed internally. settlement risk. 7.
5. The portfolio Manager is neither responsible nor liable for any losses resulting from the operations of the schemes. Investment will be of a longer duration compared to a trading in securities. Investment in stock market is subject to market risks and the investment. The client has perused and understood the disclosures made by the portfolio manager in the Disclosure Document before entering into this agreement. 6. Possibilities of recovery of loss in investment only through expensive legal process. Mis-judgment by the Portfolio Manager or his incapacitation due to any reason however remote is also a risk. Liquidity Risk: Risk will be monitored in terms of the number of days it takes to liquidate every stock in the portfolio assuming a share of the average volume traded over the pervious one year.
. highly volatile stock markets in India.
1. The portfolio Manager is not guaranteeing or assuring any return on investment. policy changes of local/ international market which affects stock markets.4. Such loss could arise due to factors which by way of illustration. Securities investments are subject to market risk and there is no assurance or guarantee that the objectives of the scheme will be achieved. default or non performance of third party. include. 2. natural calamities. 4. 5. value of portfolio may go up or down depending on the factors and forces affecting stock markets. Any policy change/ technology updating / obsolescence of technology would affect the investments made in a particular industry. The investment made is subject to external risks such as War.
The Brokerage charged is .
.20 paisa which is much less as compared to Kotak PMS which is . 10 Lakh
Types of Portfolio
It will be a discretionary portfolio where the customer won’t have a say when to purchase and when not to purchase a particular stock.INFORMATION REGARDING OTHER PLAYERS OF PMS
EMKAY STOCK BROKING
The PMS provided by the Emkay Stock broking PMS is basically a defensive type of portfolio where they try to give the maximum return by taking moderate risk.5 % on the initial corpus. The research reports are available to the clients.50 paisa. There is no other charge such as on profit.
The Emkay Stock Broking PMS charges a flat fees of 2.
To enter into this portfolio management service with Emkay Stock broking the minimum investment is Rs. To cater to the clients in the utmost interest they have an in-house research department.
Types of Portfolio
Time Horizon The time horizon that a client has to remain invested as advised by the Emkay Stock Broking is 12 to 18 months. They have the second largest assets under management after Kotak PMS. The number of clients at the present moment under this service is approximately around 673. The numbers of stock which are kept in the portfolio are near about 20.Asset under Management
The modus operandi under them is roughly Re 700Cr.
Types Of Portfolio
It will be a discretionary portfolio where the customer won’t have a say when to purchase and when not to purchase a particular stock. The investment objective is to provide a customized portfolio to the customer depending on their needs. Then there is a charge on profit which is negotiable that it could be 80 : 20 or 90 : 10. The Brokerage charged is . The fund manager first talks to the client and then creates a portfolio according to their needs. The research reports are available to the clients.
The Arihant Capital charges an up-front fee of 2 % on the initial corpus. To cater to the clients in the utmost interest they have a in-house research department.
.40 paisa which is less as compared to Kotak PMS Service. They also offer advisory for the real estate and the art pieces for which they charge a nominal fees. That is what type risk profile a customer have whether he is a high risk taking person or of a low risk taking person.ARIHANT CAPITAL MARKET
The PMS provided by Arihant Capital is basically a customized type of portfolio where they try to first know the risk profile of the client and then develop a portfolio according to their needs.
To enter into this portfolio management service with Arihant Capital minium investment is 20 Lakh.
89 13.36 51.75 38.
In % Particular Very High Risk High Risk Moderate Risk Low Risk Very Low Risk 3 month 12. A client could move out whenever he likes.26 23.25 34.05 12.60 1 year 38.22 48.63 32.Time Horizon
There is no holding period with Arihant Capital Market.72 14.23 38.02 31.52
.91 20.27 16.19 6 month 31.71 29.94 2 year 42 32.51 33.
The fee has to be forwarded to Treasury & Accounts Division. The application in Form A along with additional information (Form a and additional information available on SEBI website : www.F A Qs
1. advices or directs or undertakes on behalf of the clients (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities of the funds of the client. 25000/. Exchange plaza.sebi. as the case may be is a portfolio manager.gov. SEBI.4 th Floor. What is the procedure of obtaining registration as a portfolio
manager from SEBI?
An applicant for registration as a portfolio manager is required to pay non-refundable application fees of Rs. Who is a Portfolio Manager?
Any person who pursuant to a contract or arrangement with a client. Mumbai.400051. SEBI . What is the difference between a discretionary portfolio manager and non discretionary portfolio manager?
The discretionary portfolio manager individually and independently manages the funds of each client in accordance with the needs of the client in a manner. which does not partake character of a mutual Fund. Bandra (E).
3. Mumbai400021. “G” Block. whereas the non-discretionary portfolio manager manages the funds in accordance with the directions of the clients.
. Nariman point. Bandra-Kurla Complex.
4.in ) and copy of the receipt of the application fee is to be submitted to the Division of funds.(Rupee Twenty Five Thousand Only) by way of demand draft drawn in favor of ‘Security Exchange Board of India’ payable at Mumbai. 15th floor . Earnest House.
6. equipment’s and the manpower to effectively discharge the activities of a portfolio qualifications in finance. law. etc. The applicant also has to fulfill the capital adequacy requirement. What Does SEBI consider while granting the Certificate of registration to the applicant ?
SEBI takes into account all matters. The applicant has to be a body corporate and must have necessary infrastructure like adequate office space. which it seems relevant to the activities relating to portfolio management. Who is the Principal Officer of a Portfolio Manager?
Principal Officer means a director of the portfolio manager who is responsible for the activities of portfolio management and has been designated as principal officer by the portfolio manager. accountancy or business management from an institution recognized by the government. have at lest five years experience as portfolio manager or stock broker or investment manager or in the areas related to fund management. What is the Capital adequacy requirement of a portfolio manager?
The Portfolio manager is required to have a minimum net worth of fifty Lakh rupees.
8. between them. The applicant should have in its employment minimum of two persons who.5. 40
. How long does the certificate of registration remain valid?
The certificate of registration remains valid for three years.
13. Are the Portfolio Managers required to pay annual fee to SEBI?
11. every portfolio manager is required to pay a sum of five Lakh rupees as registration fees at the time of taking the registration certificate by SEBI.
Whether any contract should be made between the Portfolio Manager and its client? Yes. the portfolio manager is not required to pay any annual fee to SEBI. enter into an agreement in writing with the client clearly defining the inter se relationship and setting out their mutual rights. The Portfolio Manager before taking up an assignment of management of funds or portfolio of securities on behalf of the client. IS there any registration fee to be paid by the portfolio managers?
Yes. liabilities and obligations 41
What is the procedure of renewing the certificate of registration?
The portfolio manager who wants to renew its certificate of registration has to make an application for renewal in Form A three months before the expiry of the validity of the certificate.
How much is the renewal fees to be paid by the portfolio manager?
The portfolio manager is required to pay 2 Lakh and fifty thousand rupees as renewal fees to SEBI.
14. However. Is there any specific value of funds or securities below which a portfolio manager can’t accept from the client while opening the account for the purpose of rendering portfolio management service to the clients?
The Portfolio manager is required to accept funds or securities having minimum worth of 5 lakh rupees from the client while opening the account for the purpose of rendering portfolio management service to the client. have not prescribed any scale of fee to be charged by the portfolio manager to its clients. The total exposure of the portfolio client in derivatives should not exceed his portfolio funds placed with the portfolio manager and the portfolio managers should basically invest and not borrow on behalf of his clients. leveraging of portfolio is not permitted in respect of investment in derivatives. The portfolio manager shall take specific prior permission from the client for charging such fees for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is outsourced)
Is a Portfolio Manager permitted to invest the fund of its client in derivatives?
A portfolio manager is permitted to invest in derivatives.relating to the management of funds or portfolio of securities containing the details as specified in Schedule IV of the SEBI (Portfolio Managers) Regulation Act 1993. including transactions for the purpose of heding and portfolio rebalancing.
16. through a recognized stock exchange. The fee so charged may be a fixed amount or a return based fee or a combination of both. However the regulations provide that the portfolio manager shall charge a fee as per the agreement with the client for rendering portfolio management services. What fees can a Portfolio Manager Charge from its clients for the rendered by him?
The SEBI (Portfolio Managers) Regulations 1993.
Where can an investor look out for information on portfolio managers?
Investors can log on to the website of SEBI www.gov. To help out the investors the grievance redressal and dispute mechanism is also provided by the portfolio manager in the Disclosure Document. Investors can approach SEBI for 43
.17. How can the investors redress their complaints? Investor would find in the Disclosure Document the name. interrelate .sebi. Addresses of the registered portfolio managers are also available on the website. contains the quantum and manner of payment of fees payable by the clients for each activity for which service is rendered by the portfolio manager directly or indirectly (where such service is out sourced). portfolio risk. This disclosure document.in for information on SEBI Rules. address and telephone number of the investor relation officer of the portfolio manager who attends to the investor queries and complaints. complete disclosure in respect of transactions with related parties as per the accounting standards specified by the Institute of Chartered Accountants of India in this regard.
What is the disclosure mechanism of the portfolio managers to their clients?
The Portfolio Manager provides to the client the disclosure Documents at least two days prior to entering into an agreement with the client. regulation and guidelines pertaining to portfolio managers.
19. the performance of the portfolio manager and the audited financial statements of the portfolio manager for the immediately preceding three years.
18. On what basis is the performance of the portfolio manager calculated?
The performance of a discretionary portfolio manager is calculated using weighted average method taking each individual category of investments for the immediately preceding three years and in such cases performance indicators is also disclosed.
The PMS industry is in developing phase. Franklin Templeton. As per the facts and figures studies in this report by taking consideration of all parameters we can suggest that FRANKLIN TEMPLETON is the leading portfolio management service provider amongst all. 5000cr to Re 10000cr industry. competitive cost & transparency etc) in comparison to direct equity investment. Today the PMS industry is approximately Re.redressal of their complaint. returns etc. As other players have just entered into this segment they do not have substantial corpus under them but they are slowly making their presence felt by giving back good returns. It is at the same level as the mutual fund industry was some 10-15 years back. which is attracting many financial institutions to venture out in this field. Investors may send their complaint to. People are still not matured to this industry as it is a new concept in India and secondly people have lost their faith due to the different scams which have hit India’s capital market in past. Further as far as the players are concerned it is very difficult to rank all of them because they have their own investment approach thus accordingly they provide service to their proffered customers. Seeing this in the last years or so the number of portfolio management service providers has increase drastically. The returns given by the different portfolio management services provider were better than the industry average. In future as people will know about these schemes they will try to take benefits out of it. Emkay Stock Broking through different parameters like fee structure. and SBI has already entered the market.
It can be summarized that having an in depth study of PMS and comparing the three major players HDFC AMC. SEBI takes up the matter with the concerned portfolio manager and follow up with them. as they think returns are high. 44
. personalized service. it can be said that specialized service has its own benefits (like time saving. Kotak Securities. Banks like UTI are thinking to come into this field.
4.equitymaster. www. 3.emkayglobal. www. www. www. 45
. www.kotaksec. www.kotakpms. 2. HDFC research report.com 4.com 6.com 3.com 5.com 2. Kotak PMS Presentations. Value Research.com
Magazines and other publications
1. HDFC PMS Presentation.arihantcapital.REFERENCE
Following references have been utilized during the progress of project