Brokerages to get less clients for portfolio schemes
Targetting high networth individuals who are in a better position to take risks, the Securities and Exchange Board of India has hiked the minimum investment limit under the portfolio management scheme (PMS) to Rs 25 lakh from the current Rs 5 lakh per client.business Updated: Jan 29, 2012 22:44 IST
Targetting high networth individuals who are in a better position to take risks, the Securities and Exchange Board of India has hiked the minimum investment limit under the portfolio management scheme (PMS) to Rs 25 lakh from the current Rs 5 lakh per client.
This means lesser number of clients for PMS schemes.SEBI on Friday increased the minimum investment amount in PMS scheme to Rs 25 lakh but said that the new rule would be applicable for new clients and fresh investments. The proposed amendment would be applicable on prospective basis for new clients and for fresh investments by existing clients.
Brokerage houses will now have to devise new strategies, said a PMS head of Mumbai-based brokerage house.
PMS is an important source of income for brokerage houses. Under PMS, a fund manager charges a fee for managing the fund of an investor. By offering such service, brokerage houses charge portfolio management fees around 2- 2.5% per year from clients alongwith brokerage on transactions.
Earlier, PMS was offered only to very rich or ultra networth individual clients since large corpuses contributed to higher portfolio management fees. But with the entry of new players and increasing competition among brokerage houses, firms began to target investors with moderate fund sizes. The idea was that the fee will be comparatively less but the number of clients would rise.
The market regulator wants to ensure that PMS should be targeted for ultra high networth individuals, said Mehraboon Jamshed Irani, head, private client group, Nirmal Bang.
PMS products carry higher degree of risk which is suitable only for high netwoth individuals who are more informed about these products and are in better position to take risk, said Anshu Kapoor, head, global wealth management, Edelweiss Financial Services.