The Hindu Business Line : `Level field on tax front will be of immense help'

"The market will have an appetite for structured products and more," says Mr Shahzad Madon, Senior V-P and Head - PMS, Prudential ICICI MF in an interview to Business Line.

Excerpts:

Do you see the PMS business changing in India in the days ahead?

Yes, we do see it moving beyond equity and fixed income. A strong market appetite for structured products, commodities, real estate and overseas investment will come into focus. We believe that PMS services will seek to fulfil such market demands, subject to the regulatory framework available, through various innovations on the products side.

As for other trends, the PMS segment will raise the bar in terms of customisation as well as investor communication and interaction. This will be in line with growing client expectations.

Are there any roadblocks for the PMS business under current regulations?

The last quarter of 2002 witnessed significant changes in PMS regulations. These have gone a long way in improving the prospects of the business. We believe that creation of a level playing field on the tax front for PMS investments will immensely help its case.

Besides, relaxation of norms with regard to international investment and permitting allocation to assets beyond equity and debt would further augment investment avenues available to PMS investors.

How has Pru ICICI's PMS evolved since it was launched?

We launched the service in 2000, the first AMC to do so. This was a time when there was a little participation by established players in this segment. It was built it on several planks - transparency, customer service, innovation and performance.

Investors, we think, have received the proposition well. To give you some numbers, we have over Rs 5,000 crore as AUM/advisory under our PMS, courtesy 800 retail and institutional investors. In short, the business today is viewed as a compelling mainstream option, making it an increasingly attractive business avenue.

What are the developments on the products front?

We have launched several innovative options over the past five years, including some firsts in the industry. On the equity side, there are products like the Aggressive Portfolio and the Dividend Yield Portfolio. The first is a diversified basket of equities, while the second has stocks that quote at an attractive dividend yield. Our Deep Value Portfolio is made up of stocks that are significantly undervalued.

As for structured products, we offer options such as Asset Shield, a capital preservation version that combines fixed income and equity derivatives, and Arbitrage Portfolio, which takes advantage of spreads between the price of a stock future and the underlying stock.

Besides, there is the Asset Shield Enhancer, a variant for corporates.

How have clients' requirements changed over time?

Investors today are far more sophisticated than before, which is evident from the level of interest in their portfolios and the awareness of market realities. By and large, PMS investors are more demanding not only in terms of returns but also in terms of quality service and customisation. This is a favourable trend; such customers compel you to innovate and strive for improvement. Further, these investors know what they need. They are more receptive to innovations.

The PMS business, by its very nature, offers a robust feedback mechanism to customers and facilitates greater interaction between them and investment managers.

Most clients take advantage of this so as to get more comfort in terms of their portfolio position.

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