Portfolio Management Services (PMS) – Frequently Asked Questions

What is better for an investor? A mutual fund or a PMS?

Both Mutual Fund and PMS are important for an investor. PMS uses a different approach of investing as compared to a Mutual Fund. An investor can allocate to PMS a certain portion of his investible surplus that he usually allocates to equities. PMS is neither superior nor inferior compared to mutual funds. PMS is a complementary product. It manages money in a way that a mutual fund (especially an open-ended fund) would find difficult to do.

Who can invest in the “Core Equity Portfolio? What is the ideal time horizon while choosing to invest in the PMS?

The following investors are eligible to invest in the “Core Equity Portfolio:

  • Individuals – Resident and Non Resident Indians (after opening a PIS account as required under RBI guidelines)
  • Hindu Undivided Families (HUF)
  • Corporate Entities – Private Limited, Public Limited, Partnership firms, etc.
  • Any other eligible investor holding a valid PAN and Aadhar and who has not been barred from investing in equity markets either by the regulator OR by the Government of India.

The Portfolio sees an investment opportunity by having a different time horizon to investing. We see opportunities in good businesses when they are in the midst of temporary difficulties. Our proposition is to buy good businesses which are being ignored by the market due to some difficulties, and to hold them till they become popular again. On the other hand, if such opportunities arises in a poor business, we are not interested in exploiting it

Does this portfolio have any bias towards large-caps, mid-caps or small-cap stocks? What is the benchmark for this portfolio?

The Core Equity Portfolio does not have any capitalization bias.
The benchmark for the portfolio is the NIFTY 50 TRI.

What is the investment process followed for stock selection by the Portfolio Manager?

The investment process consists of:

  • Screening all possible choices to create an investment universe of acceptable quality
    • A track record of at least 15 years
    • Consistency in generating a 20% or higher return on capital employed
    • Consistency in generating positive free cash flows
    • A minimum acceptable level of revenues of 400 crores
  • Further filter the universe on the basis of growth prospects and management quality
    • The ability of the company to grow its sales and profits over the next 3-5 years
    • The ability of the company to do this without consistently resorting to additional external funding
    • The track record of management in capital allocation decisions, and in treating minority shareholders fairly
  • Construct the portfolio using filters of valuation levels
    • The valuation at the time of entry into the portfolio is lower than its average valuation for the previous decade and / or
    • The valuation is lower than the expected growth rate in earnings over the foreseeable future
    • At least 75% of all client portfolios will be from the investment universe

What is the number of stocks expected to be held in the portfolio? Is there any stock and sector exposure limits?

The portfolio manager will construct the portfolio in about 4 – 6 weeks. The portfolio has two options:

  • Regular (with a universe of 20-25 stocks )
  • Concentrated (with a universe of 10-15 stocks )

Presently, no stock will have an individual exposure of more than 10% at the time of purchase. The maximum single sector exposure will be 30%. However, the Portfolio Manager reserves the right to review and amend these internal restrictions from time to time.

What is the maximum component of cash expected in the portfolio?

Cash is used as a temporary parking space until we find an attractive-enough opportunity in equity. We do not pre-decide the extent of cash. If we find an opportunity tomorrow, the cash position will come down. This is irrespective of the level of the Index.

What are the returns an investor can expect from the PMS?

This is a very difficult question to answer. Too many variables are at work in the stock market for us to come to any conclusions about the returns expected. Also, the portfolio may not closely stick to the benchmark index, and hence the portfolio returns will be at a variance to the benchmark returns. That said, it can be said that a well-managed PMS and a well-managed mutual fund would aim to beat the benchmark index over a period of time.

What is the procedure for opening the PMS account?

A bank account and demat account will be opened in the name of the investor with our custodian. The investor provides a power of attorney to PGIM India Asset Management to operate these accounts on behalf of the investor.
The investor also enters into an agreement with the Portfolio Manager, i.e., PGIM India Portfolio Management Services, clearly defining the rights, liabilities and obligations relating to the management of the portfolio.

Sr No List of Documents Individual Account NRI Account HUF Account Partnership Account Corporate Account
1 PMS Agreement alongwith POA in favour of PGIM India Asset Management Private Limited
2 Letter Confirming Name of the Client in case of difference in Proof of Identity & Address
3 Letter confirming Registration of POA to Bank & Demat A/c of the Client
4 HDFC Bank Ltd - Bank A/c and Demat Account Opening Form
5 KYC Form
6 FATCA Confirmation ( one each for PGIM India AMC )
7 Portfolio Investment Scheme (PIS) application form        
8 FEMA Declaration        
9 FORM W-8 / W-9        
10 Overseas Address Proof        
11 Passport Copy, Visa Copy and Immigration Stamp copy on Passport        
12 PIO Card OR OCI Card        
13 Balance Sheet Copy for the last 2 years      
14 Authorised Signatory List      
15 Beneficial Ownership Details      
16 List of Directors / Partners      
17 Certified copy of MOA / AOA / Partnership Deed      
18 PAN Card copy
19 Proof of Address
20 Nomination form    
21 Photographs of each applicant and nominee    

The detailed list of documents required are provided in the PMS application form.

Every account needs to undergo an In-Person Verification process before the account is activated.
The TAT for account opening (after receiving all the requisite documents in proper order ) is T + 7 business days.
Once the account is activated a welcome letter will be sent to the investor welcoming them into the PGIM India family and giving full details about their bank and demat account

What is the minimum investment amount for the PMS? Is it necessary to invest only in cash in the PMS account?

As stated by SEBI regulation, the minimum investment amount for the PMS is Rs. 50 Lacs. This can be in the form of cash, stock transfer, or a combination of both. The cheque should be issued in favour of “PGIM India Pool Collection Account” in case of Resident Indian Accounts and “Client Name (First Applicant) in case of NRI Clients.”. You can also transfer funds to your PMS account by online transfer (RTGS / NEFT) or wire transfer. For the existing stock transfer, the Portfolio Manager will have the discretion to either hold or sell these securities in favour of fresh investments or reject a particular security due to its liquidity.

Does a client need to fill up any forms for additional purchase? Can investors request additional purchase in the form of stock transfer? What is the minimum additional purchase amount?

Yes, clients have to fill in the Transaction Form for additional purchase or send an email from the registered email id confirming their additional purchase. Investors can request for additional purchase in the form of stock transfer too. The minimum additional purchase amount in an existing portfolio is Rs. 1,00,000/-. The minimum additional purchase amount in a new portfolio is Rs 10,00,000/-.

Is it possible to avoid certain stocks or sectors in the portfolio due to overexposure, conflict of interest, religious beliefs, etc.?

Yes, it is possible. The PMS agreement provides for the investor to state the negative list of companies at the inception of the portfolio. This would however mean that such investors would have a different trajectory of returns as compared to others who have not given a negative list.

What is the tax treatment in PMS?

The tax liability for a PMS investor would be the same as that of a direct investor. However, the investor should consult a tax advisor for the same. Audited statement of accounts provided by the portfolio manager would help the investor in assessing his/her tax liabilities. This is made available, ideally at the end of the financial year. It shall be the endeavour of the Portfolio Manager to maintain the portfolio churning at a low level.

Is it possible to partially withdraw from the PMS investments? What are the restrictions on partial withdrawal?

Yes, it is possible to partially withdraw from the portfolio with applicable exit load (if any), provided the portfolio value remains above the limit of Rs. 50 Lacs as per SEBI regulations

The minimum amount of redemption is Rs.50,000/-.

How can an investor monitor his PMS account? What are the various statements that will be sent to investors?

All the investors are provided with a login id and password to be used on our website www.pgimindiapms.com
We also have handheld application which can be downloaded on the investor’s smart phone and provides 24 x 7 access to the investor’s portfolio details at a click of a button.

    We have an automated system of sending the following reports on a bimonthly basis:
  • Portfolio Holding Statement
  • Portfolio Performance Report.
  • Corporate Action Report.

Additionally,we can send the above mentioned reports to the registered email-ids / addresses of the investor by the 10th of the following month.

Audited reports duly certified by our auditors are sent to all investors on an annual basis, at the end of the financial year.

Additionally, we are happy to provide any information on a need basis that the investor may seek. The investor can write to us at “contact.pms@pgimindia.co.in ”.

We also have a dedicated client servicing phone line available. The investor can call us on 022-61593131 and speak to our client service executive.

Can the investor meet / talk to the Portfolio Manager and discuss his portfolio?

The quarterly PMS newsletter carries comments from the Portfolio Manager. The investor can also request for a call / meeting to discuss his portfolio. The same can be organized at a convenient day and time for the Portfolio Manager.

What are the risks associated with PMS?

All investments involve a certain amount of risk, including the possible erosion of the principal amount invested. You are requested to consult your financial advisor before taking any decisions.