Skip to main content

Wealth managers miss Sensex by a wide margin

PMS Providers Underperform Due To Wrong Investments, Higher Cash Calls & Capital Protection Strategies


   FUND managers overseeing portfolios of wealthy individuals are working overtime to catch up with the broader market that gained 75% since January this year.


   Mistimed investments, increased cash calls and capital-protection strategies adopted by PMS fund managers have resulted in several PMS folios underperforming the broader index. According to wealth managers, PMS providers have underperformed broader indices by around 5-15%.


   Surprisingly, PMS schemes are trailing at a time when the top-10 equity diversified mutual funds have delivered annual returns between 115 and 150%.


   Ideally speaking, PMS schemes should have done better than mutual funds. But then portfolios managed aggressively have been able to outperform the broader market.


   Mutual funds are pressurised to perform well as most funds are open-ended in nature and there is a need to bring in fresh money all the time.


   The investment mandate given to a PMS fund manager could differ with each investor. If the fund manager is asked to hold a low-beta portfolio, the scheme will appreciate gradually during a surging market and decline very slowly in times of bad markets. Currently, most PMS schemes are structured giving high weightage to investment or market risk.


   Portfolio values fell 40-60% last year as stocks plunged, prompting several PMS investors to liquidate their portfolios at huge losses. Fearing steep falls, fund managers have been keeping a higher portion of cash in their portfolios, by booking profits at regular intervals. Mid-cap stocks were sold at 15-25% price appreciation. Until a year ago, PMS fund managers invested up to 90% of their entire corpus. Cash component in portfolios, of late, has risen to 20-25%. Investment horizons (in individual stocks) have come down from 36 months to 6-8 months now.


   PMS fund managers invest a large chunk of their corpus in mid-cap stocks. These, until a few months ago, lagged large caps in terms of price appreciation. PMS portfolios will look better once mid-cap stocks get fully priced.


   Another reason for underperformance of PMS schemes is that most investors — after liquidating their portfolios at a loss in mid-2008 — re-started their PMS accounts halfway into the market rally. Almost all (new) PMS investors missed the bottom and mid-half of market rally started in the first half of 2009. Investors who have put their money in simple capital-protected schemes are underperforming by a wide margin as their exposure to direct equities has been capped.


Popular posts from this blog

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...

L&T Income Opportunities Fund dividend

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 L&T Income Opportunities Fund declares L&T Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( R /unit) L&T Gilt Investment-DQ 0.3 L&T Gilt Investment Direct-DQ 0.3 L&T Income Opportunities Ret-DQ 0.31 L&T MIP-Wealth Builder-DQ 0.3 L&T MIP-Wealth Builder Direct-DQ 0.3 L&T MIP-DQ 0.3 L&T MIP Direct-DQ 0.3 L&T Short Term Opp-DQ 0.26 L&T Short Term Opp Di...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now