Sushant Bhansali, CEO, Ambit Asset Management, speaks on the PMS industry, Ambit’s products as well as client expectations. Ambit manages assets worth ₹840 crore in its PMS schemes. Excerpts from an e-mail interview:

What do individual clients look at when they invest in PMS products?

The key criteria a client looks at while investing in PMS are past performance track record, investment theses and processes, management team background, etc.

The main concerns clients have are liquidity profiles of investee companies, volatility in returns and comparable performance track record (in absence of standardised reporting).

What is your average ticket size for individual clients? What are the strategies you offer?

Our current average ticket size for clients is in excess of ₹60 lakh.

We invest in good and clean businesses which have good competitive advantages, do not depend on market cycles, and are not perceived to have political connectivity as their edge.

We have three strategies focussed towards specific segments of the market.

Coffee Can is a large-cap-oriented scheme and is suited for investors who like lower volatility and like to earn reasonable returns on a consistent basis. Good & Clean is a mid-cap-oriented scheme and is suited for investors who are comfortable with market volatility and are looking for decent risk-adjusted returns.

Emerging Giants is a small-cap-focussed scheme and is suited for savvy investors who have been investing in stock markets for a long period and understand the volatility of investing in small-caps. The returns are not consistent in this strategy and most of them, at times, get delivered in a short period of time.

All our strategies have consistently been in the top quartile within our peer group, over short and long time-frames.

Why has performance reporting for PMS been somewhat non-standardised all these years? Hasn’t this given room for mis-selling ?

In the absence of any regulation or an industry body, it is very difficult to follow a standardised approach to reporting performance.

Each type of performance-reporting has its own merits and demerits.

I would assume every PMS player has consistently been following the same approach over the years, on the basis of what they believed was the right approach to reporting performance. Mis-selling happens in many ways and non-standardised reporting can be one of them, but definitely not the most prominent reason.

From October 1, 2020, direct on-boarding is allowed in PMS. What kind of reduction in cost structure can be expected for direct clients?

One cannot quantify the reduction in cost structure due to direct on-boarding; trends will emerge in the next 1-2 years. PMS (products) are not mass market products, so the need for a distributor to reach clients will not go away so easily. While technology is breaking barriers and helping PMS players directly reach out to clients in a cost effective manner, it still has a long way to go.

How would you differentiate PMS vis-à-vis wealth management, given that wealth management firms, too, have PMS operations?

Wealth management firms mostly focus on asset allocation, estate planning, as well as advising clients on choosing the right products, which help them achieve their financial objectives. PMS is one of the products for wealth management firms to offer to their clients (like mutual funds, structured products, etc). Many wealth firms also offer proprietary PMS products to their clients.

PMS providers can have both a model portfolio approach as well as a bespoke approach to investing (both independent PMS players and wealth management-led PMS players).

Thus, PMS is an investing vehicle, while wealth management is more about choosing the right vehicle for the client.

How do you see the PMS industry in India evolving in terms of AUMs (individual) and products over the next few years?

The listed equity AUMs (non-institutional) have increased at a CAGR of 20-plus per cent in the last five years.

While the industry is quite fragmented, the top five players have more than 50 per cent market share (both in terms of AUM as well as number of clients).

Every bull market brings many new players to the industry and every bear market consolidates the industry — that has been the trend for the last 15 years or so. With more than ₹1-lakh crore listed equity AUMs, the regulator (SEBI) has recently stepped up oversight, thereby letting only the serious players continue in the business.

The minimum investment limit ensures that the industry caters only to high net worth clients who should be equipped to understand the products and take informed decisions. Alternative products like PMS and AIFs (Alternative Investment Funds) offer sophisticated investors the opportunity to invest in specialised strategies as well as get bespoke advice.

We believe the industry will continue to grow in line with the last few years’ growth. The growth will be supported by enhanced regulations (thereby, increasing investor trust), technology-enabled distribution (resulting in increasing investor outreach), and growing investor needs for differentiated products.

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