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Alternates As a Career

By:
Mr. Prateek Agrawal
Business Head & CIO, ASK Investment Managers Ltd.
Portfolio Management Services (PMS)
What is a Portfolio Management Service (PMS)?
• Portfolio Management Service (PMS) is an investment portfolio in stocks and also fixed
income, debt, structured products and other individual securities, managed by professional
managers.
• An investor in PMS will own individual securities unlike mutual fund investor, who owns
units of the scheme or a fund.
• Investment solutions provided by a PMS cater to niche segment of clients with investments
of INR 50 Lakhs or more.
• There are 3 types of PMS: Discretionary, Non-Discretionary and Advisory; however, majority
of the Asset Management Companies offer only Discretionary PMS
Type of PMS Particulars
Choice as well as timing of investment rests solely with the Portfolio
Discretionary PMS
Manager
Portfolio Manager will only suggest the investment ideas. The decision on
Non-Discretionary PMS timings as well as the choice of investment rests solely with the investor.
However execution of the trade is done by the Portfolio Manager
Portfolio Manager will advise on the portfolio. The decision on timings as
Advisory PMS well as choice of investment rests solely on the Advisor. However trade
execution is done by the Investment Manager 4
Why PMS?
Benefits of Investing in PMS:
• Professional and active management
• PMS has qualified and experienced Portfolio Managers backed by strong research team
managing portfolios on behalf of the clients instead of clients managing it themselves
• Customized / Tailor made investment advise
• PMS provide tailor-made professional services to meet the investment objectives of
various investors.
• Portfolio Manager builds and manages each portfolio keeping in mind the strategy
selected and timing of the investment.
• Transparency
• PMS investors will directly own the portfolio stocks in their DP.
• Every transaction is intimated to the investor.
• PMS is transparent with Expense Ratios with investors having 24/7 online access.
• Superior Returns
• PMS can be more aggressive and has the potential to generate superior returns.
• Portfolio Managers may choose to have meaningful exposure to such companies as
well as hold on as long as they are delivering growth by adding value and superior
returns.

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PMS Industry in India
Growing Size of Opportunity:
• Total PMS industry AuM has grown ~ 18% CAGR over the last 10 years from Rs 3.63 Lakh crs
to Rs 19.22 Lakh crs.
• Discretionary PMS AuM: Rs 16.25 Lakh crs (Rs 1.63 Lakh crs excluding contributions by EPFO)
• Non Discretionary PMS AuM: Rs 1.21 Lakh crs

• Advisory PMS AuM: Rs 1.75 Lakh crs

• In the last 5 years ending Mar 2020, the number of clients increased by ~ 29% CAGR with
currently more than 1.55 Lakh clients using the facilities of PMS.
• Currently 331 different AMCs offer the PMS Services
• High net worth Indians are increasingly looking beyond plain vanilla investment options such
as mutual funds and direct equity in their quest for generating higher returns from invested
capital.
• This uptrend is likely to continue with more wealthy investors opting for PMS as Indian
economic performance firms up in coming years.

Source: SEBI website. Data as on Oct 2020 6

Historical AuM Movement of PMS in India

PMS AuM in Rs Crs

250,000 2,000,000

200,000 1,600,000

150,000 1,200,000

100,000 800,000

50,000 400,000

- -
Dec-13

Dec-14

Dec-16

Dec-17
Dec-11

Dec-12

Dec-15

Dec-18

Dec-19
Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20
Non-Discretionary (LHS) Advisory (LHS) Discretionary (RHS)

• Discretionary PMS AuM accounts for 85% of the total PMS AuM and 93% of the total PMS
clients
• Since Mar ‘15 Discretionary PMS AuM grew by 17% CAGR, Equity MFs have grown 18%
while Nifty grew by 5.8% in the same period
Source: SEBI website. Above data includes EPFO money as well to the tune of Rs 14.61 Lakh crs as on Oct 2020 7
AuM of Top Industry PMS Companies

PMS AMC Name AuM Rs Crs # of Clients Avg Tkt Size Rs Crs)
ASK IM 19,061 26,683 0.71
MOSL 13,126 37,687 0.35
ENAM 5,186 709 7.31
Alchemy 4,469 5,388 0.83
Unifi 4,032 3,132 1.29
IIFL AMC 3,382 5,858 0.58
Marcellus 2,658 3,126 0.85
ICICI Pru 2,646 4,416 0.60
Kotak AMC 1,694 5,144 0.33
Birla AMC 1,558 3,733 0.42
Quest 1,502 1,078 1.39
Axis AMC 1,322 3,218 0.41
Invesco AMC 1,128 2,960 0.38
Ambit AMC 1,002 1,099 0.91
Old Bridge 863 342 2.52
White Oak 768 201 3.82
HDFC AMC 419 216 1.94
Avendus 324 230 1.41
Sageone 782 311 2.51
2Point2 Capital 464 576 0.80
Nine Rivers 131 202 0.65
Total 66,517 1,06,309 0.63
Industry Total 1,63,707 1,45,404 1.13
Source: SEBI website. Information as on Oct 2020. Above AuM is computed excluding the AuM for Foreign FPI and Foreign Others investor8
category
PMS Companies – grouped by Ownership

PMS Company Names AuM Rs Crs PMS Company Names AuM Rs Crs

Stand-alone Alternates Company 38863 Mutual Fund-owned 13151

ASK IM 19061 IIFL AMC 3382

ICICI Pru 2646
ENAM 5186
Kotak AMC 1694
Alchemy 4469
Birla AMC 1558
Unifi 4032 Axis AMC 1322
Marcellus 2658 Invesco AMC 1128
Quest 1502 Ambit AMC 1002

Old Bridge 863 HDFC AMC 419

MNCs 1290
White Oak 768
Credit Suisse 650
Avendus 324
Barclays 590
All-round 13126 BNP Paribas 51
MOSL 13126
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Improving Market Share of ASK Investment Managers

13%
12%

10%
9% 9% 9%
8% 8%
7% 7%
6% 6%

4% 3% 3% 3% 4%
3% 3% 3% 3% 3%
3%
2%
2% 2% 2%
1% 1%

Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Oct-20

ASK IM MOSL Enam Alchemy Unifi

ASK Investment Managers has been increasing Market Share from 6% to 13% in the last
5 Financial Years in the Indian Equity PMS industry

Note: Equity PMS AuM is considered for each AMC, excluding Foreign FPI and Foreign Others category. Only top 5 AMCs are captured in the
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above chart for Market share basis Equity PMS AuM as mentioned earlier. EPFO money is excluded for computing the Total Industry AuM.
How PMS scores vis-à-vis Mutual Funds?

Parameter PMS Mutual Funds

Objective Provide tailor-made professional service to Structured to meet the funds’ stated
meet the investment objective of various investment objective
investors
Ownership Investors directly own the individual The trustee own shares of the fund and
securities in their portfolio investors are allotted units of the fund
Customization Possible to meet special or specific Not possible
requirements of investors
Minimum INR 50 Lakhs by way of stock or cash or INR 500
Investment combination of both
Portfolio Majority of PMS portfolios are focused Majority of MF portfolios are diversified
Construction portfolios with ~ 20-25 stocks ones with more than 50 stocks
Portfolio Stock Portfolio Manager has flexibility to allocate Maximum allocation to a single stock of not
Weightage any weightage to single stocks more than 10%
Business Model Relationship model, asset allocation, Family Transactional model
Office
Fee Structure Flexible to choose Profit Sharing Fixed Fees for all investors

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PMS: High on Transparency, Focus on Alpha

PMS Transparency
• Regular statements on portfolio details and transactions
• Details on fees
• Statement on capital gains on a periodic basis
• Online access to portfolio details
• Periodic interaction with Portfolio managers
• Disclosure Document available online

Focus on Alpha
• Fixed fees charged by PMS are comparable to the management fees charged by Equity Mutual
Funds.
• In PMS, the investor can opt for a much lower fixed fee with profit sharing on a high watermark
basis.
• Profit sharing would mean the interests of both the PMS provider and the investor are aligned.
• An Illustration: The fixed fee of 1.50% in ASK PMS and a performance fee of 20% of performance
over 8% compounded hurdle over 3 years is an attractive fee structure 12
Key Regulatory Changes in PMS

No. Key Aspects Details

Revised to Rs 50 Lakhs as against Rs 25 Lakhs earlier (w.e.f.
1 Minimum Investment Amount
20 Jan 2020)
2 Distribution Commissions PMS house can give commissions only in trail format
Capped @ 0.50 % p.a (ex- Management fees /
3 Operating Expenses
Performance fees and brokerage)
4 Exit Load Capped at 3/2/1 for each Investment
Cap on transactions which can
5 be done via Associate or Self ( Not more than 20% per service per associate / self
Broking / Demat /Custody)
Direct Plan to be offered on website / marketing material /
6 Introduction of Direct Plan
Disclosure Document
To be audited on annual basis and report of the same to
7 Audit of Performance Reporting
be submitted with SEBI within 60 days from end of FY
SEBI has defined a Code of Conduct for Distributors which
8 Supervision of Distributors
they need to abide to with few compliances

The above steps taken by SEBI were with the intent to further protect the interest of the
clients and bring in further standardization and transparency in the PMS industry 13
Organizational Structure of a PMS Company

Business Head & CIO

Business Compliance & Risk Operations & Cust

Investment Team Products Team
Development Team Management Team Experience Teams

Portfolio Zonal Head 1 Zonal Head 2… Operations Team

Managers

Research Analysts Customer

Experience Team

Dealers

Apart from the above, the other supporting Departments include Legal, Finance, IT, HR, etc.
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Alternative Investment Fund (AIF)
What is a Alternative Investment Fund (AIF)?
• Alternative Investment Funds are an investment avenue to pool in funds for investing in
private equity, real estate or to hedge funds. AIFs may be established or incorporated as a
company, trust or other bodies corporate (including limited liability partnerships).
• Minimum Investment Amount: Rs 1 Cr
• There are 3 types of AIFs:

Type of AIF Particulars

AIF that invest in start-ups or social venture funds, infrastructure funds, SME
Category I funds, and so on. They are often considered socially viable or economically
desirable for the government or regulators
Funds that do not leverage or undertake to borrow other than to meet the
Category II operational requirement which does not fall under Categories I and III.
Typically Private Equity Funds fall in this category
Funds that undertake diverse or complex trading strategies including
investment in listed or unlisted derivatives. Typically Hedge Funds fall in this
Category III
category. Only close-ended funds are in Category I and II AIFs while open-
ended funds are in Category III

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AIF and PMS
Key Points of Difference

Framework Particulars AIF PMS

Category III: AIFs which include long-only Discretionary: Investment Manager
Types equities, or diverse and complex trading takes all the decision on client's behalf.
strategies, along with use of derivatives.
They are regulated by SEBI (Alternative They are regulated by SEBI (Portfolio
Regulation
Investment Funds) Regulations 2012. Managers) Regulations 1993
No of investors for every scheme or fund
Number of Investors No threshold limit is prescribed.
shall not exceed 1,000.
Each scheme is required to have a corpus
Structure Corpus Requirement No corpus requirement in case of PMS.
of Rs. 20 crores.
Sponsor/Manager are required to have
some continuing interest in AIF.
Sponsor/Manager
No such provision under PMS.
Contribution
Category III: 5% of corpus or 10 Crore
rupees whichever is less.
Min Investment
Rs 1 Cr (Commitment Amount) Rs 50 Lakhs
Amount by Investors
Holding Pool (Units) Client level (Shares)
Open ended scheme - Monthly NAV; Close
NAV Declaration Daily Valuation (available online)
Investment ended scheme - Quarterly NAV
Taxation on Capital Gains tax are applicable at the Capital Gains tax are applicable at
underlying securities Fund level individual investor level
Documentation & Application Form + Contribution Application Form + PMS Agreement +
Documentation
Reporting Agreement Demat Account Opening Form

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AIF Industry Numbers

Category Rs Crs Commitments Funds raised Investments made

Raised
Category I
Infrastructure Fund 11,803 8,731 7,711
Social Venture Fund 3,216 2,013 1,163
Venture Capital Fund 26,792 11,713 8,990
SME Fund 542 75 65
Category I Total 42,353 22,532 17,929
Category II (Real estate,
3,52,817 1,48,099 1,28,369
PE, Debt Funds, etc)
Category III (Long-only,
46,825 42,348 38,228
Hedge Funds, etc)
Grand Total 4,41,995 2,12,979 1,84,525
AIFs have grown from a mere Rs 360 Crs of Commitments in Dec 2012 to Rs 4.41 Lakh Crs
as on Dec 2020
Source: SEBI website. Information as on 31 Dec 2020 18
Risk Factors and Disclaimer

Risk arising from the investment objective, investment approach and asset allocation.
Equities as an asset class carry a higher risk in comparison to debt. While risk cannot be totally eliminated, it can be mitigated through a well-designed investment
approach. ASK Investment Managers Portfolios seek to mitigate risk and deliver superior returns through research-based investing. However, this objective may not be
fully achieved due to various reasons such as unfavorable market movements, misjudgment by portfolio manager, adverse political or economic developments etc. The
PMS is run with an objective to achieve reasonable returns consistently. Given this background the investor investing in the PMS faces the following risks
(i) Political, economic and / or related risks
The Asset Value of the portfolio and the liquidity of the shares may be affected by changes in government policy, taxation, interest rates, social and religious instability and
political, economic or other developments in or affecting India.
(ii) Industry risk
The value of shares of companies in a particular industry may be affected due to factors affecting the industry like changes in government policy on duties, FDI or a foreign
country, which is a big market for the industry, may impose restrictions on import etc.
(iii) The Indian Securities Market
The Indian stock markets in the past experienced substantial price volatility and no assurance can be given that such volatility will not occur in future. Actual market trend
may be in variance with anticipated trends hence, the decisions of the Portfolio Manager may not be always profitable.
(iv) Liquidity Risk
Some stocks that the investor might be invested in might not be highly liquid. Though it will be the PMS service providers endeavor to restrict investments in less liquid
stocks to a lower limit, there is an exposure of liquidity risk to the investor.

DISCLAIMER:
Any information contained in this material shall not be deemed to constitute an advice, an offer to sell/purchase or as an invitation or solicitation to do for security of any
entity and further ASK Investment Managers Limited (ASKIM) and its employees/directors shall not be liable for any loss, damage, liability whatsoever for any direct or
indirect loss arising from the use of this information. Recipients of this information should exercise due care and caution and read the Disclosure Document (if necessary
obtaining the advice of finance/other professionals) prior to taking any decision on the basis of this information which is available on https://www.askfinancials.com/ask-
investment-managers/disclosure.

ASK Investment Managers Limited has not independently verified all the information and opinions given in this material. Accordingly, no representative or warranty,
express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this material. ASKIM has launched direct onboarding
facility. This facility shall enable users / visitors to have direct access to ASK IM PMS Investment approaches. These product are also available through existing
Distributor/Referral or Channel Partners also. The performance related information provided herein is not verified by SEBI nor has SEBI certified the accuracy or adequacy
of the same.

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Thank You