The Hindu Business Line : Tailor-made portfolios drawing many customers

Few issues
Portfolio managers will normally not guarantee performance.
There may still be limitations imposed by liquidity, valuations and interest rate.
Risks may arise from derivatives securities lending, collaterals, currency movements, tax laws etc.

Kolkata , Oct. 4

Fund houses are rapidly warming up to the potential of separately managed portfolios, offered to clients who are more well-heeled than the rest.

More and more asset management companies have started eyeing a segment that is becoming larger by the day — thanks almost entirely to wealthy individuals who would rather go in for portfolios that are tailored to suit specific needs than for portfolios that are aimed at all and sundry.

Wooing individuals

The concept of maintaining separate accounts, each of which requires a personalised strategy, has never been marketed more seriously, say MF circles, adding that it has started drawing a larger number of customers. Also, more products are being designed to woo individuals with different investment objectives.

A wealthy, HNI, says Mr Jaideep Bhattacharya, CMO of UTI MF, is sometimes willing to put in a big-ticket investment because he is aware of the potential of a separately managed portfolio. UTI MF's portfolio management service, branded under the name `Axel', for instance, seeks to cater to those who want specific solutions. And its kitty is getting larger.

Among the fund houses that have lately started off on this front are ABN Amro, which has announced that it will provide structured products through its discretionary portfolio management services. It has joined the ranks of other service providers, including Prudential ICICI and Birla Sun Life.

MF sources also suggest that some of their clients are being drawn to the idea because they are interested in focused portfolios run by select fund managers. The fact that there is a fund manager who will help operate a customised portfolio is a big plus, observed Mr Raghvendra Nath of Birla Sun Life MF.

Technology, others add, is aiding the entire process of maintaining separate portfolios. At a very basic level, it helps in providing investors with password-enabled access to portfolio statements and profit and loss positions. Customers are also able to check their transactions.

Fund houses are addressing the growth potential by rolling out more options. Newer products are being worked out to suit various investment needs. With multiple products under their belt, marketing personnel are finding it easier to vend the concept.

Prudential ICICI MF, for instance, talks about portfolios styled to meet specific requirements. An aggressive portfolio will therefore be different from one that has capital preservation among its underlying principles or from another that chiefly aims at delivering higher dividend yield.

Such a strategy assumes that a single high net worth investor may even make multiple allocations, choosing more than one styles. For an individual who has such an assertive approach, a few key issues are important, MF sources feel. One, portfolio managers will normally not guarantee performance. Two, there may still be limitations imposed by liquidity, valuations, interest rates and the like. Three, there may be risks arising from derivatives securities lending, collaterals, currency movements, tax laws etc.

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