The Hindu Business Line : Smaller investors may miss portfolio management services

Mumbai, May 19 Smaller investors may now find it difficult to get portfolio management services (PMS), with the market regulator SEBI last week disallowing pooling of resources by the portfolio manager.

SEBI’s directive raises the operational burden for portfolio managers who would now prefer to deal with clients who can invest higher amounts, believe analysts. “The transaction cost is likely to go up for the portfolio manager who is not a broker,” said Mr P.R. Dilip, Managing Director, Impetus Wealth Management Ltd. “It will not make economic sense for portfolio managers to deal with small investment amounts.”

Earlier, the portfolio manager would take his call on a particular stock and distribute it on a weighted average basis among his PMS clients. “The large PMS operators, especially, will now find it a nightmare, servicing hundreds of clients,” said Mr Nipun Mehta, co-founder & CEO, Unitis Tower Wealth Advisors, a private wealth management firm.

However, with the new guideline, the comfort level of the client is expected to go up; it is also in line with the international practice, said Mr Dilip.

Pooling can be manipulated to facilitate volume creation and lend scope for price rigging, said experts. With the new guideline, only the truly professional companies will operate in the PMS business, they said.

The minimum investment that portfolio managers commonly accept from clients for PMS is Rs 5 lakh. However, many foreign players only deal with clients who invest Rs 50 lakh or more.

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