PURTI KAUNDERASSIGNMENT FOR INVESTMENT BANKING

ROLL NO. BF15010

What is PMSPortfolio Management Services account is an investment portfolio in Stocks, Debt and fixed income products managed by a professional money manager, that can potentially be tailored to meet specific

investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to

address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique. As per SEBI guidelines, only those entities who are registered with SEBI for providing PMS services can offer PMS to clients. There is no separate certification required for selling any PMS product. So this is case where mis-selling can happen. As per the SEBI guidelines, the minimum investment required to open a PMS account is Rs. 5 Lacs.

However, different providers have different minimum balance requirements for different products

HOW DOES PMS WORK• Each PMS account is unique and the valuation and portfolio of each

account may differ from one another. There is no NAV for a PMS scheme; however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Each PMS account is unique from one another. Every PMS scheme has a model portfolio and all the investments for a particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme. However the portfolio may differ from investor to investor. This is because of:

• Entry of investors at different time.• Difference in amount of investments by the investors• Redemptions/additional purchase done by investor• Market scenario – Eg If the model portfolio has investment in Infosys, and

the current view of the Fund Manager on Infosys is “HOLD”(and not “BUY”), a new investor may not have Infosys in his portfolio.

• Under PMS schemes the fund manager interaction also takes place. The frequency depends on the size of the client portfolio and the Portfolio Management Services provider. Bigger the portfolio, frequency of interaction is more. Generally, the PMS provider arranges for fund manager interaction on a quarterly/half yearly basis.

FEE STRUCTURE FOR PMS• A PMS charges following fees. The charges are decided at

the time of investment and are vetted by the investor.• Entry Load – PMS schemes may have an entry load of 3%. It is

charged at the time of buying the PMS only.• Management Charges – Every Portfolio Management Services

scheme charges Fund Management charges. Fund Management Charges may vary from 1% to 3% depending upon the PMS provider. It is charged on a quarterly basis to the PMS account.

• Profit Sharing – Some PMS schemes also have profit sharing arrangements (in addition to the fixed fees), wherein the provider charges a certain amount of fees/profit over the stipulated return generated in the fund. For Eg PMS X has fixed charges of 2% plus a charge of 20% of fees for return generated above 15% in the year. In this case if the return generated in the year by the scheme is 25%, the fees charged by the PMS will be 2% + {(25%-15%)*20%}.

SEBI registered PMS in India

• Geojit BNP Paribas• ICICI Prudential• Motilal Oswal

WHAT ARE MUTUAL FUNDS

• A mutual fund is a pool of money from numerous investors who wish to save or make money just like you. Investing in a mutual fund can be a lot easier than buying and selling individual stocks and bonds on your own. Investors can sell their shares when they want.

COMPANIES FOR MUTUAL FUND Franklin India Prime Plus Fund Invesco India Growth Fund SBI Blue Chip Fund BNP Paribas Dividend Yield Fund L & T Infrastructure Fund

FEE STRUCTURE OF MUTUAL FUND

SEBI has recently come out with a circular that AMCs would be allowed to charge an additional 30 bps of TER on the condition that the new inflows from beyond top 15 cities are at least 30% of gross new inflows in the scheme or 15% of the scheme's AUM (year-to-date), whichever is higher. In other words, TER may go up to 2.8% instead of 2.5% for equity schemes. However, the additional TER will be clawed back if inflows from beyond top 15 cities are redeemed within a period of one year from the date of investment. The circular also stated that mutual funds shall annually set apart at least 2 bps on daily net assets within maximum limit of TER for investor education / awareness initiatives.

WHAT ARE AIF’S• An investment that is not one of the three

traditional asset types (stocks, bonds and cash). Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts.

TYPES OF AIF’s• Category I AIF are those AIFs with positive spillover

effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India; Such funds generally invests in start-ups or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. They cannot engage in any leverage except for meeting temporary funding requirements for not more than thirty days, on not more than four occasions in a year and not more than ten percent of the corpus.eg. Venture Capital Funds, SME Funds, Social Venture Funds and Infrastructure Funds. Giving effect to the announcement by Union Finance Minister on angel investor pools in the Union Budget 2013-14, SEBI in June 2013 has approved a framework for registration and regulation of angel pools under a sub- category called 'Angel Funds' under Category I- Venture Capital Funds.

TYPES OF AIF contd..• Category II AIF are those AIFs for which no specific incentives

or concessions are given. They do not undertake leverage or borrowing other than to meet the permitted day to day operational requirements, as is specified for Category I AIFs. eg. Private Equity or debt fund.

• Category III AIF are funds that are considered to have some potential negative externalities in certain situations and which undertake leverage to a great extent; These funds trade with a view to make short term returns. These funds are allowed to invest in Cateogy I and II AIFsalso. They receive no specific incentives or concessions from the government or any other Regulator.eg. Hedge Funds (which employs diverse or complex trading strategies and invests and trades in securities having diverse risks or complex products including listed and unlisted derivatives).

AIF’s Category I Aavishkaar India Micro Venture Capital Fund Adharshila Venture Capital Fund Aditya Birla Private Equity Trust Category II ACA Private Equity Trust Aditya Birla Private Equity Trust Ashmore Centum India Recap Fund Category III Karvy Capital Ltd Edelweiss Malabar Capital

THANK YOU