Stock Market

PMS firms woo clients as hike in investment threshold looms

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Portfolio Management Service (PMS) firms are going all out to pull in clients before the new year when the minimum investment threshold is expected to double.

Currently, an investor must put up at least Rs 25 lakh to be eligible for PMS schemes, which mostly cater to the rich, to accept at least Rs 25 lakh from an investor.

This is expected to go up to Rs 50 lakh from January 1. PMS firms fear the new minimum investment requirements could make it tougher for them to attract investors in challenging market conditions.

“It is important to acquire new clients as many investors start small and increase their commitments once they are comfortable with the portfolio manager,” says Amit Doshi, investment director, CARE PMS. Many of these portfolio managers are offering higher fees to distributors and brokers to push their products.

The larger firms are offering upfront commissions as high as 4-5 per cent to their distributors and brokers to rope in clients. “A few firms are incentivising their distribution partners by paying upfront commissions as high as 4-5 per cent,” said the head of a PMS firm.

A part of the fees — generally 3-4 per cent — is charged as a set-up fee, while an exit load of about 2-3 per cent is levied on the client if they were to exit in the first year of investments. Some are flying down fund managers to meet select HNIs or getting them to talk over the phone to convince prospective clients. “Fund houses have got very vibrant and active they are doing roadshows and concalls with investors and channel partners,” says Daniel GM, founder, PMSBazaar, an online analytics portal. Existing investors with ticket sizes of less than Rs 50 lakh can continue but new investors will have to comply with the new rules from January 1. Doshi said PMS firms are looking to firm up deals with investors, who have been in discussions in the past three months, before the minimum ticket size doubles. Many firms are using analytics to target investors who have lost money by investing themselves in mid- and small-cap stocks. “Sales person are trying to convince investors of the benefits of using the services of a dedicated portfolio manager compared to doing it themselves,” says Alok Ranjan, fund manager (PMS), Way2Wealth.

With the mid- and small-cap segment down over the last couple of years, the going has been tough for asset managers to acquire new clients. The PMS industry has been struggling to get new clients after poor performance of mid- and small-cap stocks since January 2018.

The S-P BSE Midcap Index is down 18 per cent from its January 2018 peak, while the S-P BSE Small Cap Index is down 33 per cent in the same period.

Some individual stocks have lost even more with many of them down as much as 75 per cent.

Many PMS schemes that focus on midcap and small-cap strategies have lost client money, while some are even finding it difficult to liquidate stocks.




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