Equity PMS Compare

Additional Useful Information

• Only SEBI authorized companies can provide Portfolio Management Services.

• There is no concept of ‘stock price’ or ‘NAV’ in PMS. However, PMS companies regularly send out performance reports to Investors that show investors their current position i.e. how much they have invested, and what the current value of the investment is. However, the reports go much deeper than just the net position in that they give detailed portfolio performance information.

• Currently, the minimum amount that can be accepted by an Equity PMS company is ₹50,00,000. Therefore, this investment mode is suitable for more experienced and mature investors with a larger investable fund.

• Portfolio Management Service companies have a dual fee structure –
• Management Fees – A fixed management fee is charged on an annual basis. This is typically 2% of the assets under management and is charged irrespective of whether profits are generated or not.
• Profit Sharing – This is an amount that is charged only if the company generates a return beyond a minimum specified percentage. For example, let us say that the profit sharing is 20% beyond the minimum return of 10%. Therefore, any returns earned by the investor above this minimum 10% return, will have 20% profit sharing charged by the PMS company.

• These fees and charges vary between different PMS companies.

• An investor can withdraw the amount fully or partially at any time subject to the terms and conditions laid down by the PMS companies.

• Equity PMS is considered a good investment option for those investors with a longer-term investment horizon of 5+ years.

Returns *

• Equity PMS companies do not guarantee returns. However, the scope for generating above average returns is high due to the aggressive & active management by the fund managers of the PMS company.

• Returns depend on and vary between individual PMS Companies.

Risk Level

• Equity PMS are very high-risk investments.

• This is because PMS companies use aggressive trade strategies to generate high risk adjusted returns.

Liquidity

• Equity PMS are liquid. An investor can exit them at any time. There may be certain charges levied in case of early withdrawal of funds.

Interesting Facts

• The role of the fund manager is very important in a Portfolio Management Service. The fund manager makes all the key decisions, directly impacting on the investment decisions taken and the final returns for the investors.

• Compared to Equity mutual funds, Equity Portfolio Management Service is more flexible. Equity PMS have less constraints imposed on them by the regulators and their fund sizes are smaller compared to debt mutual funds. This allows them the potential to earn higher returns.

• There are various custom options available amongst Equity PMS companies for investors to select from in line with their investment goals.

• The costs of equity PMS are the highest in the entire equity investment industry. However, they have the potential to generate the highest returns as well.

Tax Implications

• Earnings received from Equity PMS are taxable.

• When investors sell their Equity PMS units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the equity securities are sold within a period of 2 years from investment, the Capital Gains earned (called Short Term Capital Gains) are to be added to the taxable income of the investor at 20%.
• Situation 2 – If the equity securities are sold after a period of 2 years from investment, the Capital Gains earned (called Long Term Capital Gains) are to be added to the taxable income of the investor at 12.5%.

• There is no tax in case of “Capital Loss.”

• For any dividends/payouts received by investors from Equity PMS, these amounts are added to their total taxable income and tax is required to be paid as per the tax slab.

Where To Invest

• https://www.icicidirect.com/services/portfolio-management-services

• https://www.motilaloswal.com/portfolio-management-services