Select Your Location
The Portfolio Managers (PM) are professionals who make investment decisions and perform investment functions on behalf of vested individuals and institutions. They devise and implement investment strategies and processes to meet client goals and constraints. While carrying on the investment activity, the portfolio managers, in addition to the investment approach, are now required to take an additional layer of broadly defined investment themes as per the circular “Performance Benchmarking and Reporting of Performance by Portfolio Managers“, dated 16th December 2022. The SEBI has issued the said circular to help the investor assess the Portfolio Manager’s performance. The present article will enumerate the revision provisions brought by SEBI under the circular.
Table of Contents
The Portfolio Managers generally use the investment approach for investment purposes. An Investment Approach or IA is the documented investment philosophy the Portfolio Managers adopt when managing the client’s funds to achieve the client’s objectives. However, with the issue of the current circular, the SEBI has mandated that in addition to the IA, the portfolio managers are required to adopt a new investment theme called “Strategies”. These strategies shall include Debt, Equity, Multi-Asset and Hybrid. The other performance benchmarking measures introduced by the SEBI under the said circular are:
The SEBI, under the circular for performance benchmarking and reporting, requires the Association of Portfolio Managers or APMI to prescribe the same corresponding valuation norms for Portfolio Managers as applicable to Mutual Funds. The portfolio manager is required to valuate the portfolio debt and money market securities by PM as per the standardised norms specified by the APMI.
Moreover, the APMI forms valuation agencies for providing security prices to Portfolio managers. In return, the portfolio managers are required to use such valuation services only from the formed valuation agencies for valuating the debt and money market securities managed by them. Also, the end responsibility of fair valuation shall be of the Portfolio Manager.
The SEBI, in addition to the performance benchmarking, has also reviewed the performance reporting requirements by the portfolio managers, which shall be taken according to the following:
However, the portfolio manager may use the aggregated performance of statistics of all investors for the aggregated reporting of performance.
Verification of Reporting: The verification of the performance statistics shall be carried out in the annual audit as per regulation 30 of the SEBI (PM) Regulations.
Submission of Reports: The portfolio managers must submit monthly reports to the APMI and SEBI within 7 days from the end of every month. After which, the APMI shall publish their reports on its website in a user friendly manner for facilitating the comparison by providing access of reports to all the stakeholders at the portfolio level, investment approach level, portfolio manager level and industry level information level. The APMI shall also provide the relative performance of each investment approach within the strategy to the concerned portfolio manager and disclose the same on its website.
The provision for the circular on performance benchmarking and reporting shall apply to any entity publishing or reporting or advertising the performance of any IA of any portfolio managers.
The circular explicitly provided that the following portfolio of investors or clients of portfolio managers which will not be covered by the provisions of the said circular:
The circular has made it mandatory that the portfolio manager shall not advertise or publish or mention to any other equity the reruns of the IAs. However, the PM can include assets managed in such IAs when communicating publicly or at the time of regulatory requirements.
The performance benchmarking will act as a measure to ascertain a portfolio manager’s performance. It will determine the ability of the portfolio manager to meet the client’s objective at the required time. The SEBI in furtherance of this objective has issued the current circular so that the investors can assess the performance of PM. The SEBI has now made it mandatory the IA shall be tagged with the strategy and the APMI has to frame a maximum of 3 performance benchmarks, which will be used by the PM while assessing. Henceforth, the increase in the reporting requirement has scrutinise the actions of the Portfolio managers for the protecting the interests of the investors.
Read Our Article: Portfolio Management Services- A Budding Business
An Advocate by profession, Nikhil Mogha holds experience in the field of Business and Securities law. He has done his Masters of Law in Corporate Law from Guru Gobind Singh Indraprastha University, New Delhi. He is also versed with the drafting and research work in the field of Company Law, Banking Laws and Contract Laws.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 3 + 3 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper on the proposed amend...
26 May, 2023
The Electronic Book Provider (EBP) is a SEBI-registered recognised stock exchange that provides an electronic platf...
14 Oct, 2022
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!