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The Evolution of Portfolio Management Services in India.

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Equirus Wealth

02 Feb 2023 4 min read

The portfolio management service (PMS) industry in India has undergone a significant evolution in recent years, driven by a variety of factors including regulatory changes, advancements in technology, and increased competition.

What is portfolio management services (PMS)?

Portfolio management services (PMS) are a type of investment service that involves the professional management of a portfolio of on behalf of an individual or institutional investor. The portfolio manager, who is responsible for managing the portfolio, makes investment decisions and manages the portfolio's assets as per the investor's objectives and risk tolerance.

PMS can be offered to a wide range of investors, including high-net-worth individuals, institutional investors, and retail investors. The services offered by PMS providers can vary widely, but typically include investment advice, portfolio construction, and ongoing management of the portfolio. Some PMS providers may also offer additional services such as tax planning and estate planning.

PMS is different from other types of investment services, such as mutual funds and exchange-traded funds (ETFs), in that the portfolio manager has a high degree of discretion and control over the portfolio. This allows the portfolio manager to make investment decisions that are tailored to the specific needs and objectives of the individual investor.

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PMS in Early Days

In the early days of the PMS industry in India, the service was primarily offered by large financial institutions such as banks and insurance companies. These institutions offered PMS as a way to manage the investments of their high-net-worth clients, who were typically looking for a more personalized and customized investment experience. However, the PMS industry was largely unregulated during this time, which led to a lack of transparency and accountability.

In the early 2000s, the Securities and Exchange Board of India (SEBI) introduced many regulatory changes aimed at improving the transparency and accountability of the PMS industry. These changes included the introduction of minimum net worth requirements for PMS providers, as well as the requirement for PMS providers to register with SEBI and disclose important information such as investment strategies and performance data.

The Impact of Regulatory Changes

The introduction of these regulatory changes had a significant impact on the PMS industry in India, as it led to the entry of several new players into the market. This increased competition led to a more diversified range of PMS offerings, with providers now offering a wider range of investment options and strategies.

Impact of Technology

The PMS industry in India has also been impacted by advancements in technology. The use of technology has allowed PMS providers to offer more efficient and cost-effective services. For example, Equirus offers an online portal that allows clients to track their investments and access other services such as portfolio rebalancing and performance reporting. Additionally, the use of technology has allowed PMS providers to automate many of their internal processes, which has helped to reduce costs and improve efficiency.

The PMS industry in India has also seen a shift in the types of clients it serves. In the past, PMS services were primarily targeted at high-net-worth individuals. However, in recent years, there has been a growing demand for PMS services from retail investors. This shift has led to the introduction of more accessible and affordable PMS offerings, such as those targeted at small and medium-sized investors.

The PMS industry in India has also seen a shift in the types of investment strategies offered. In the past, PMS providers primarily offered traditional investment strategies such as equity and fixed income. However, in recent years, there has been a growing demand for alternative investment strategies such as real estate, private equity, and hedge funds. This shift has led to the introduction of more diverse PMS offerings, with providers now offering a wider range of investment options and strategies.

To conclude, the PMS industry in India has undergone a significant evolution in recent years. This evolution has been driven by a variety of factors including regulatory changes, advancements in technology, and increased competition. These changes have led to a more transparent, accountable, and diversified PMS industry, with a wider range of investment options and strategies being offered to a wider range of clients. As the trend of personalization and customization of investment services continues to grow among Indian investors, we can expect to see the PMS industry in India continue to evolve and adapt to meet the changing needs of its clients.