Client base of PMS providers contracts 20%
Portfolio managers have seen over a fifth of their clients drop off in the year to May 2021 despite the rally in the markets.
Portfolio management service (PMS) providers had 163,684 clients in May 2020, which dropped 21.2 per cent to 128,994 as of May 2021, shows data compiled from a monthly regulatory bulletin. The Securities and Exchange Board of India (Sebi) releases PMS data with a lag — data for May was released earlier this month.
Experts believe one reason for the decline is the tightening of rules before the pandemic’s outbreak. Curiously, the surge in the stock markets since is also believed to be a factor driving the exits.
The S&P BSE Sensex has risen 72.1 per cent since last May, and many investors saw individual stocks multiply manifold. More diversified PMS funds would not necessarily have provided the same returns, and many clients may have acted on the difference in gains, said independent market analyst Ajay Bodke. “Lot of investors… feel they can do better,” he added.
A senior official at a leading asset manager noted that the PMS segment had signed up a lot of clients around five years ago. They did not see good returns as the markets stagnated for a few years. Many are now choosing to take cash off the table as their investments turn profitable. This tends to happen when a boom follows a period of mediocre returns, he suggested. “Any cycle… it will happen,” he said.
Sebi also recently tightened the rules governing PMS services. The minimum investment in such schemes was raised from ~25 lakh to ~50 lakh with effect from January 2020. Any additional investments made would have to take the total to at least ~50 lakh.
“The client may withdraw partial amounts from his portfolio, in accordance with the terms of the agreement between the client and the Portfolio Manager. However, the value of investment in the portfolio after such withdrawal shall not be less than the applicable minimum investment amount,” reads a note on Sebi’s website.