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The Indian financial market is diversifying and fast-changing. Making the right decision for investments becomes more difficult. A portfolio manager plays a major role in making the right choice. High-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) especially need the portfolio managers to manage their money the right way.
Portfolio managers manage investments and give equal importance to risk management, market analysis, and tax efficiency. A skilled portfolio manager creates a specific investment plan based on the investor’s goals, risk tolerance, and time horizon.
In this article, we will discuss in detail portfolio managers, their key roles, how SEBI regulates them, and why their importance has increased so much today.
A portfolio manager is a licensed investment professional who manages investments according to the investor’s financial goals, risk tolerance, and time horizon. They arrange investments and revise the plan as per the market changes through regular monitoring and review.
Many confuse portfolio managers with financial advisors or mutual fund managers. But the financial advisors give general advice, and mutual fund managers manage large funds, whereas the portfolio managers create individual and personalized strategies for each client.
Portfolio Management Services (PMS) in India are especially for investors who want to invest large sums of capital correctly and maintain a balance between asset growth and risk control in the long term.
Investment in the modern financial market is not limited to buying and selling shares. There are investment opportunities in bonds, derivatives, real estate investment trusts, and even international markets. Making the right decision and rebalancing investments at the right time is not an easy task with so much diversity.
HNIs and UHNIs are often involved in diversified businesses and assets. So, it is almost impossible for them to monitor each investment individually. In this situation, a portfolio manager designs the investment plan and also pays special attention to risk management, market analysis, legal compliance, and tax structuring.
Therefore, the assistance of a skilled portfolio manager is one of the key ways to protect and effectively grow an investor’s wealth.
1. Setting Investment Goals
The first responsibility of a portfolio manager is to clearly understand the client’s financial goals. Some may want to save for retirement; others want to grow capital quickly. Therefore, plans are made according to the risk-taking ability, expected returns, and investment timeframe. It is not possible to achieve investment success without setting the right goals.
2. Portfolio Diversification
Investing in the same type of asset increases the risk a lot. So, portfolio managers invest money in different asset classes—such as stocks, bonds, mutual funds, and even alternative investments. Diversification provides partial protection for the investor’s assets from market volatility and brings stability in the long term.
3. Asset Allocation
Diversification alone is not enough; it is also important to invest in the right proportion. A skilled manager determines what percentage of money should be kept in which investment. For example, a risk-tolerant client may have a higher share of stocks, while a client seeking stable income may have a higher share of bonds and debt instruments.
4. Risk Management
There will always be uncertainty in the market. Therefore, controlling risk is one of the most important responsibilities of a portfolio manager. They try to reduce potential losses with their risk-analysis techniques. For example, hedging techniques or choosing defensive stocks. This protects the investor’s capital.
5. Regular Monitoring and Review
The work is not over once a plan is made. Market conditions and economic policies are continuously changing. Therefore, the manager regularly reviews the portfolio and rebalances it if necessary. This ensures investments are always with the set goals.
6. Communication with the client
Maintaining transparency is a big responsibility. The portfolio manager provides reports to the client from time to time, where the investment status, profit and loss, and proposals for changes are clearly highlighted. So, the client can be sure about the movement of their assets.
Have a look at the major types of portfolio managers-
Active Portfolio Manager
These types of managers work to beat the market. They try to get extra returns through regular research, stock selection, and market timing. They make quick decisions with every change in the market and restructure the portfolio as needed. Although the risk is relatively high, there is also the potential for higher profits.
Passive Portfolio Manager
They usually follow a specific index or rule-based strategy. Their goal is to keep up with the market, not beat the market. Since the costs are low and transactions are limited. It is suitable for investors looking for stable returns in the long term.
Discretionary vs. Non-Discretionary Manager
Discretionary Manager: The manager can make decisions without the client’s permission. This allows for quick action.
Non-Discretionary Manager: The client’s approval is required for every investment decision. This is a good option for investors who want more control.
If the client doesn’t want to go through the hassle of market analysis, then a discretionary or active manager is better. If you want stable returns at a low cost, then a passive manager is better. For those who want to have more control over their own decisions, non-discretionary services are better.
Portfolio Management Services (PMS) in India are primarily regulated by SEBI (Securities and Exchange Board of India). SEBI has framed several rules to protect the interests of investors. The main points are-
Legal Entity: A PMS firm should have a minimum net worth of ₹5 crore. This ensures that the financial position of the firm is strong enough.
Minimum Investment Rules: The minimum investment amount for clients in PMS is fixed at ₹50 lakh. Therefore, it is mainly suitable for high-net-worth investors.
Client Fund Management: PMS companies cannot pool the money of different investors like mutual funds. A separate account has to be maintained for each client.
Onboarding Guidelines: Monthly statements are mandatory for each investor for onboarding. This clearly states the status and activities of the assets.
Change in Control: Any change in the control of a PMS firm requires prior approval from SEBI. Investors can also opt out of the service within 30 days without any cost.
It is mandatory to follow these rules, as they are very important for investor protection and market confidence.
The significant benefits of hiring a portfolio manager are mentioned below-
Personalized financial planning: Individual investment plans based on each client’s goals and risks.
Professional skills and research-based decisions: Advanced strategies combined with market analysis, research and experience.
Tax structuring expertise: Ensuring tax efficiency through the right investment structure.
Time and peace of mind: HNIs and UHNIs do not need to look into every detail of the investment themselves.
A portfolio manager is an investment advisor, a custodian and a strategic planner of your assets. The portfolio managers play an active role in everything from setting the right goals to controlling risk, diversification and regular monitoring. So, investors get stable returns and ensure financial security in the long term. If you are looking for SEBI-registered Portfolio Management Services that align with your long-term financial goals, Enterslice is here for you. We specialize in PMS registration, compliance, and advisory services. Contact us today and take your investments on a safe and effective path to growth.
A portfolio manager creates a separate investment plan for each client. A mutual fund manager manages a common fund, where the money of many investors is pooled. So, a portfolio manager offers a more personalized service, while a mutual fund manager manages large funds for the general investor.
PMS is primarily for high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs). However, any investor who meets the minimum investment requirements and wants a personalized strategy can avail PMS. This service is especially suitable for those who have large sums of capital and need a long-term plan.
As per SEBI norms, the minimum investment amount for PMS is ₹50 lakh. This ensures that the service is primarily for large investors. Mutual funds are a relatively more affordable option for small investors.
Before allocating assets, the manager analyses the client's risk tolerance, financial goals and time horizon. Based on this, the proportion of investment in shares, bonds, gold or other assets is determined. This process is called Asset Allocation.
The biggest risk is market volatility. Moreover, the manager's strategy may not give the expected results. The fee structure can also be costly for the investor in some cases. Therefore, it is important to check the manager's experience and track record before hiring a PMS.
SEBI is the main regulator of the PMS sector. It makes rules regarding eligibility, minimum net worth, investment limits, transparency and reporting. It also approves changes in the institution. This regulation protects investors and maintains confidence in the market.
Yes, NRI investors can avail PMS. However, their investments have to comply with FEMA and RBI guidelines. NRIs can easily invest in India through PMS services with proper approval and documentation.
In Discretionary PMS, the manager takes investment decisions without the client’s permission. In Non-Discretionary PMS, the client’s approval is required for every decision. Discretionary is good for those who want quick action, while non-discretionary is good for those who want to maintain control.
Managers generally charge fees in two ways, fixed fees or performance-based fees. Fixed fees are charged at a fixed rate, while performance-based fees depend on how much the portfolio has gained. Sometimes, a combination of the two structures is also used.
It is important to check the manager's experience, track record, fee structure, and transparency. It is important to ensure that their investment philosophy aligns with the client's goals and risk appetite. This will help you make the right decision.
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