The Hindu Business Line : `Equity returns in future will be company specific rather than sector or market driven'

There is a strong case for portfolio management services in current market conditions, feels Mr Shahzad Madon, Senior Vice-President and Head, PMS, Prudential ICICI MF. Here, he underlines key trends in the PMS space.

Excerpts:

What are the trends that are setting the pace for PMS providers?

Investors have been receptive to the idea of availing of PMS services, which, thanks to performance, services offered and innovation, have evolved as a mainstream investment avenue since 2004.

Our experience shows that during the last year there has been a robust increase in inflows on account of new customer acquisition as well as by way of existing customers increasing their allocation.

The increase in demand for new solutions, such as absolute return products that perform in all market conditions and low risk-high return products, is an evolving trend.

Any new products added to your PMS portfolio?

We have recently developed two new products - Alpha Portfolio and Infrastructure Portfolio.

The first seeks to capture alpha, which is outperformance to index. The entire portfolio is hedged against overall market movements by using Nifty futures. The second is a thematic portfolio that invests in companies, which stand to benefit from increased spending on infrastructure.

How much do you manage under the PMS? What has been the rate of growth in recent years?

We currently manage/advise more than Rs 6,000 crore across asset classes including fixed income, equity and equity derivatives. Our equity assets have grown by about 60 per cent in the last one year.

The most popular scheme is what we call Aggressive Portfolio.

We are now considering launching derivative-linked structured products. Incidentally, corporates and overseas investors have stepped up their interest in PMS.

If assets under management are indeed increasing, is there a case for cost rationalisation?

We believe PMS services are among the most cost-effective investment solutions. The pricing structure is fair and transparent. Depending on the portfolio, customers are offered fixed or variable fees. An investor can choose the one that works best for him.

We do not believe that PMS is a more expensive idea, given its customised proposition to investors. It is like riding in a chauffer-driven car at a competitive price vis-a-vis taking a bus. While both take you to the same destination, the former is a more efficient and personalised mode of transport.

With individual stocks gaining considerably, does it make sense to get into a PMS at all?

The market has seen a secular rally across stocks and sectors on account of the low valuations prevailing earlier, robust fundamentals and strong inflows.

We believe that valuations are currently reasonable across sectors. However, the best of operational and financial leverage is behind us. Equity returns in future will be company-specific rather than sector or market driven.

We believe that it has become vital for investors to research their companies thoroughly before picking up stocks.

In case of most investors, given the paucity of time and the low inclination for research, there is a need for the services of professional managers to manage their funds.

The case for availing of the services of such professionals is further strengthened in today's market condition.

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