The country’s top 20 portfolio managers have seen combined outflows of ₹3,400 crore in the first half of this financial year amid dismal performance.
Fourteen of these 20 funds have seen outflows, led by ASK Investment Managers (₹2,700 crore), Quantum Advisors (₹1,700 crore) and IIFL Wealth Portfolio Managers (₹1,700 crore), data compiled by Kotak Institutional Equities shows. These funds together manage nearly ₹2-lakh crore or 75 per cent of the discretionary PMS AUM.
Ten of these portfolio managers have given negative alpha for a one-year period. Marcellus Investment Advisors, leads the group of underperformers with a negative alpha of 14 per cent over a one-year period. The other top laggards include ASK Investment Managers (9.8 per cent) and Sundaram Alternate Assets (9.5 per cent).
A negative alpha indicates the portfolio manager’s schemes or strategies have underperformed the benchmark or market.
Marcellus’ Little Champs strategy is the worst performer in the year to October with returns of -12.6 per cent. Two other schemes from the Marcellus stable, Rising Giants (-4.4 per cent) and Consistent Compounders (-1.5 per cent) are also among the worst performers, data from PMS Bazaar showed.
MF industry gains
“Quite a few of these funds are seeing net outflows over the past 6-9 months, unlike the mutual fund industry. PMS inflows have been largely concentrated in funds with very strong outperformance versus benchmarks, whereas struggling fund houses have seen outflows,” said a note by Kotak Institutional Equities, adding that the MF industry was potentially a net beneficiary of outflows from PMS funds.
Most of the PMS schemes tend to adopt concentrated portfolios, which can work both ways. If few of the calls go wrong, it can hit overall performance. One reason for the recent underperformance could be that most PMS strategies are growth-oriented, while value as a theme has outperformed in the last 12-18 months, said experts.
“Many portfolio managers, especially large ones, are seeing outflows on the back of significant profits made by clients who are using the market buoyancy to book gains and take some profits off the table. Additionally, a lot of this money is flowing into small- and mid-cap mutual funds which are much more diversified and offer more stability versus concentrated PMS portfolios,” said Sameer Kamdar, Founder, Smart Money.
The diversion of funds towards IPOs may have also prompted outflows. “Some new PMS players are garnering a lot of AUM with differentiated offerings. Investors may be tempted to switch within the PMS/AIF universe as new ideas and offerings emerge,” Kamdar said.
According to Kirtan Shah, Founder of Credence Wealth Advisors, investors with ₹50 lakh to ₹1 crore are better off investing in MFs rather than PMS as the former will offer better style and portfolio diversification. One has to pay tax every time the PMS fund manager buys and sells, unlike in MFs where an investor pays tax only when he sells.
PMS schemes managed ₹24.9-lakh crore under the discretionary portfolio, ₹2.3-lakh crore under the non-discretionary portfolio, and ₹2.5-lakh crore under advisory, latest regulatory data showed.
The PMS segment invests money on behalf of well-off individuals. The minimum investment that regulations allow is ₹50 lakh.