In the world of high-net-worth investing, a one-size-fits-all approach simply doesn’t cut it. High-net-worth individuals (HNIs) have different financial goals, diverse risk appetites, and unique life situations that demand a more tailored strategy. Personalized Portfolio Structuring within Portfolio Management Services (PMS) offers a bespoke approach, ensuring that investments align with an individual’s long-term financial aspirations and risk tolerance.

In this blog, we will explore how personalized portfolio structuring can enhance PMS performance and why this approach is crucial for HNIs who seek not only to grow their wealth but to protect and sustain it over time. But before we go there, let’s find out what is risk profile and how it is calculated for PMS investors.

HOW THE RISK PROFILE GETS COMPUTED?

If we have to define it in a line then , a risk profile is generally calculated by assessing an individual’s ability and willingness to take on risk in their investments. This involves both quantitative and qualitative factors.

1. Investor’s Risk Tolerance

This involves understanding how comfortable the investor is with taking risks. It’s often assessed through a risk tolerance questionnaire, covering Short-Long-term goals, Emotional Response to Market Volatility (e.g., would they sell, hold, or buy more during a downturn?), Past Investment Experience & Financial Knowledge.

2. Risk Capacity

Risk capacity measures an investor’s financial ability to take on risk. It is based on the following factors like Time Horizon in terms of Experimental Age of Investors, Income and Savings, Liquidity Needs, Dependents and Family Responsibilities.

3. Risk Required

This evaluates the level of risk needed to achieve the investor’s desired financial goals. If an investor wants high returns, they may need to accept a higher level of risk. This is usually assessed through:

• Return Expectations: Estimating the required rate of return to meet specific financial objectives.

• Investment Goals: Matching the risk level to long-term goals like retirement, buying a house, or education funding.

4. Quantitative Analysis:

To further solidify the risk profile, quantitative measures are applied using financial data:

• Standard Deviation: Measures the volatility of an asset or portfolio, showing how much returns fluctuate from the average.

• Value at Risk (VaR): A statistical technique that estimates the potential loss of an investment or portfolio over a specified time frame and confidence level.

• Beta: Measures the sensitivity of a portfolio’s returns to overall market movements. A beta greater than 1 indicates higher volatility than the market.

5. Risk Profiling Tools and Models

Financial advisors and firms use risk profiling models and algorithms to classify an investor into categories like conservative, moderate, or aggressive. These tools often incorporate Monte Carlo Simulations & Stress Testing to see how a portfolio performs under extreme market conditions, such as during financial crises and how will it impact the investors.

After these five factor computation, final risk profile is calculated and investors are categeorised in these buckets:

• Conservative: Low risk tolerance and capacity, focus on capital preservation.

• Moderate: Balanced approach between risk and return.

• Aggressive: High risk tolerance, capacity, and return expectations.

Based upon these risk profiles whether a PMS investor is conservative, moderate or aggressive, the personalisation happens at every level of the portfolios to incorporate and reflect the true essence of the above stated five factors. This is how it is done –

1. Aligning Investments with Personal Financial Goals

By keeping individual financial goals at the core of the investment strategy, personalized portfolio structuring paves the ladder for the portfolios to climb when the market is bullish and to systematically step down when bear gets on the nerves. Unlike traditional investment methods that follow fixed and generalized asset allocation models, PMS focuses on understanding an investor’s specific objectives—whether it’s capital preservation, aggressive growth, or steady income generation.

For example, an HNI who is nearing retirement might prefer a conservative, income-focused strategy that ensures their wealth lasts through their later years for their future and their future generations. On the other hand, a younger investor looking to build substantial wealth over the next two decades to fuel his or her aspirations might have a higher risk tolerance, allowing for a portfolio heavily skewed towards high-growth sectors. This level of portfolio adaptations for HNIs means the portfolio not only meets current needs but evolves with the investor’s changing life stages.

2. Tailoring Asset Allocation Based on Risk Appetite

Risk appetite plays a pivotal role in any investment strategy, and HNIs often have a range of comfort and reserve levels when it comes to market volatility. Personalized portfolio structuring within PMS takes into account the individual’s risk tolerance, adjusting the asset allocation accordingly.

For a more risk-averse HNI, a well-structured PMS portfolio might lean towards safer instruments like bonds or blue-chip stocks, which offer stability and steady returns. Conversely, a risk-tolerant investor might have a portfolio composed of equities, alternative investments, or emerging markets, providing the potential for higher returns.

This dynamic risk management ensures that portfolios are optimized not only for returns but also for peace of mind, giving investors confidence that their portfolios are built to weather market volatility while pursuing growth.

3. Continuous Performance Optimization Through Active Management

Personalized portfolio structuring doesn’t stop at the initial setup. One of the standout features of PMS is its active management approach, where portfolio managers continually monitor and adjust portfolios to stay aligned with the investor’s goals and changing market conditions.

Through this proactive management, underperforming assets are swiftly replaced, and emerging market opportunities are seized, ensuring that the portfolio remains resilient and adaptive. This flexibility allows HNIs to maximize returns over time, without the need for them to constantly track market trends or economic shifts. The personalized aspect of PMS ensures that these changes are always in line with the investor’s profile, risk tolerance, and financial objectives.

4. Holistic Wealth Management for Long-Term Success

Beyond asset allocation and active management, personalized portfolio structuring in PMS also involves comprehensive wealth management, incorporating tax planning, estate management, and intergenerational wealth transfer strategies.

PMS managers for HNIs often act as financial partners, ensuring that every element of the portfolio aligns with the investor’s broader financial plan. This means that beyond just returns, PMS ensures long-term wealth sustainability, protecting the investor’s legacy and ensuring that financial goals are met well into the future.

The Bonanza PMS Advantage: Personalized for Superior Performance

At Bonanza Portfolio Management Services, we take pride in offering a truly personalized PMS experience for our HNI clients. Our team of expert portfolio managers collaborates closely with investors to tailor portfolios that are in complete alignment with their financial goals, risk appetite, and market outlook. We believe that personalized portfolio structuring is the key to unlocking superior investment performance, and our results speak for themselves.

With absolute returns of 1000%, Bonanza PMS offers the perfect blend of customization, risk management, and long-term growth for HNIs looking to elevate their wealth management strategy. Let us help you craft a portfolio that reflects your financial future—tailored, optimized, and designed for success.

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Dhanteras, the auspicious day that marks the beginning of Diwali celebrations, is a time when many people turn to gold as a symbol of wealth and prosperity. Traditionally, this meant purchasing physical gold in the form of jewelry or coins. However, with the evolution of financial markets, there are now several modern investment avenues available for those looking to invest in gold. In this blog, we will delve into various options such as Gold Exchange-Traded Funds (ETFs), Sovereign Gold Bonds (SGBs), and stocks related to gold companies. By understanding these options, you can make informed decisions that align with your financial goals.

1. Understanding Your Gold Investment Options

Gold ETF

What Are Gold ETFs?

Gold ETFs are investment funds that hold physical gold bullion and trade on stock exchanges like regular stocks. Each share of a Gold ETF represents a specific quantity of gold, usually one-tenth of an ounce.

Key Features:

• Liquidity: Gold ETFs can be bought and sold throughout the trading day at market prices, providing high liquidity.

• No Maximum Limit: Investors can purchase as many shares as they wish, making it accessible for both small and large investors.

• Diversification: Investing in Gold ETFs allows you to gain exposure to gold without the need for physical storage or security concerns.

Tax Implications:

• Short-term capital gains (if held for less than three years) are taxed at your marginal tax rate.
• Long-term capital gains (if held for more than three years) enjoy a 20% tax rate with indexation benefits.

Sovereign Gold Bonds (SGBs)

What Are SGBs?

Sovereign Gold Bonds are government securities denominated in grams of gold. They are issued by the Reserve Bank of India (RBI) and provide an alternative to holding physical gold.

Key Features:

• Government Backing: SGBs are backed by the Government of India, making them a secure investment option.
• Interest Payments: Investors earn a fixed interest rate of 2.5% per annum, paid semi-annually.
• Tax Benefits: If held until maturity (8 years), capital gains from SGBs are tax-exempt. If sold before maturity, they incur a 20% tax on gains after five years.

Maximum Subscription Limits:

• Individuals can invest up to 4 kg of gold per financial year, while Hindu Undivided Families (HUFs) can invest up to 4 kg as well.

Gold Stocks

Investing in stocks of companies involved in gold mining or production is another way to gain exposure to gold prices. These stocks can be more volatile than physical gold or ETFs but may offer higher returns if the companies perform well.

Key Considerations:

• Market Risk: The performance of gold mining stocks is influenced not only by gold prices but also by operational efficiency, management decisions, and geopolitical factors.
• Potential for Dividends: Some mining companies pay dividends, providing an additional income stream.

2. Assessing Your Investment Goals

When choosing between these investment options, it’s essential to assess your financial goals and risk tolerance:

Risk-Averse Investor

If you prefer stability and lower risk:

• Opt for SGBs: The government backing and fixed interest payments make them a safer choice for long-term investors seeking capital preservation.

Risk-Tolerant Investors

If you’re comfortable with market fluctuations:

• Consider Gold ETFs or Stocks: These options allow for potential short-term gains but come with increased volatility and risk.

3. Additional Considerations

Investment Horizon

Your investment timeline is crucial in determining which option is best for you:

• Long-Term Investments: SGBs are ideal if you plan to hold your investment for several years due to their tax benefits and interest payments.
• Short-Term Trading: For those interested in active trading or short-term gains, Gold ETFs provide flexibility and immediate access to market prices.

Market Trends

Staying informed about market trends is vital when investing in gold:

• Over the past five years, Gold ETFs have delivered annualized returns exceeding 12%. Understanding these trends can help you make better investment decisions

Economic Factors

Gold often acts as a hedge against inflation and currency fluctuations. Monitoring economic indicators such as interest rates, inflation rates, and geopolitical stability can provide insights into future gold price movements.

4. Conclusion

This Dhanteras offers a unique opportunity to explore various avenues for investing in gold beyond traditional physical purchases. Whether you choose Gold ETFs for their liquidity, Sovereign Gold Bonds for their security and interest payments, or stocks related to gold mining companies for potential high returns, each option has its unique advantages and considerations.

As you celebrate this auspicious occasion, take the time to evaluate your financial goals and risk appetite carefully. By making informed decisions about your gold investments this Dhanteras, you can pave the way for a prosperous financial future. Happy investing!

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Diversification and Risk Management in PMS for HNIs: Unlocking Unique Strategic Edges for HNIs

In today’s ever-evolving landscape of investments, High-Net-Worth Individuals (HNIs) & Ultra High Net Worth Individuals are looking for more than just traditional investment streams to protect and multiply their wealth. For them, standard options like mutual funds or fixed deposits can fall short of meeting when it comes to minimizing risks while maximizing returns. This is where Portfolio Management Services (PMS) step in, offering a tailored and diversified approach that strategically aligns with an investor’s financial goals. In this blog, we explore how PMS stands apart by delivering advanced diversification and superior risk management, ensuring a bespoke investment journey for HNIs.

What Makes PMS Different from Standard Investment Options?

Unlike standard mutual funds or other conventional financial products, PMS is a highly personalized service where portfolios are curated based on the investor’s specific financial objectives, risk appetite, and time horizons. This one-on-one approach allows PMS to implement tailored investment strategies that are observed to go far beyond the general market trends followed by mutual funds.

While mutual funds pool the resources of many investors and offer limited flexibility in terms of asset allocation, PMS provides bespoke portfolios that can invest in niche markets, alternative investments, or global assets. This flexibility allows PMS to curate highly diversified portfolios, reducing the vulnerability that comes with market volatility, thereby, providing robust risk management.

The Importance of Diversification in PMS

For HNIs, one of the greatest benefits of PMS is its ability to diversify investments across a wide array of asset classes, sectors, and geographies. This diversification spreads out risk and reduces the impact of any one investment going south. Here’s how PMS takes diversification to a higher level:

1. Multi-Asset Diversification: PMS allows for seamless allocation across various asset classes such as equities, bonds, commodities, and alternative investments like private equity and hedge funds. This ensures that no single asset class dominates the portfolio and the fund is distributed all over the prominent options to minimize the overall risk.

2. Sectoral and Geographic Diversification: PMS can tap into global markets, including emerging markets, providing opportunities for growth in industries and sectors that are booming internationally. By spreading investments across various and different sectors (technology, pharmaceuticals, FMCG, etc.), PMS aims to safeguard the returns glitches against regional and sector-specific downturns.

3. Niche and Alternative Investments: PMS can also allocate part of the portfolio to alternative assets that are often overlooked by standard investment options. Such niche investments add another layer of diversification, as they typically have lower correlations to traditional stock market performance.

Superior Risk Management in PMS: What Sets It Apart

As the amount of investment is a hefty one, HNIs prioritises and value risk management as much as they do returns. For this, we all know that PMS offers active risk management techniques that are far ahead than standard investment strategies. Unlike the relatively static nature of MF Fund Managers, PMS managers actively monitor portfolios and rebalance them to protect investors’ interests.

Here’s how PMS excels at risk management:

1. Active Portfolio Rebalancing: PMS managers consistently and minutely track portfolio performance to adjust it based on market conditions. If one asset class begins to underperform or if economic indicators signal a downturn, the manager shuffles the fund and reallocates resources to protect against losses.

2. Tactical Asset Allocation: Another advanced feature of PMS is tactical asset allocation. This involves short-term adjustments to asset allocations to tap the market opportunities while minimizing risks. For example, during periods of high market volatility, PMS managers may increase exposure to more stable assets like bonds or cash equivalents.

3. Customized Risk Profiles: Since every HNI has different risk DNA, PMS offers custom-built portfolios options that complements these risk profiles. This personalization allows investors to take on the exact amount of risk they are comfortable with while still aiming for high returns.

4. Downside Protection: PMS Managers can incorporate hedging strategies such as derivatives, futures, and options to insulate HNIs investments from uncertain downturns during market crashes. This ensures that the investor’s capital remains safeguarded even in bearish markets.

How PMS Balances Risk and Reward for HNIs

In order to conclude it wisely – diversification and risk management are crucial and hence the ultimate goal of any PMS is to strike a balance between risk and reward. For HNIs, PMS aims to offer strategies that combine aggressive growth tactics with risk mitigation techniques to maximize potential returns without jeopardizing capital.

Moreover, PMS portfolios undergo constant performance monitoring. Managers track how each element of the portfolio is performing and make real-time adjustments to optimize returns while keeping risks in check. This active management helps create a smoother investment experience for HNIs, offering them peace of mind even during volatile times.

Driven by the wave of decent returns, these days have seen significant rise of HNIs & UHNIs investment in Mutual Funds, companies like Bonanza with its scheme of Prima, are also providing tailored made PMS that are centred around MFs. With these new options, one can reduce the risk, enhance the rewards exponentially. One can explore this completely on this https://bonanzawealth.com/mfpms/

Being an HNI, Why Should Choose PMS?

For HNIs looking to secure their financial futures, Portfolio Management Services provide a 360 degree-rounded solution that aims to maximize returns and minimize risk through strategic diversification and hands-on management. By offering multi-asset diversification, sectoral flexibility, and active risk mitigation techniques, PMS ensures that high-net-worth portfolios are resilient to market shocks and tailored to achieve long-term financial goals.

Ultimately, the personalized attention, advanced strategies, and superior risk management offered by PMS make it an invaluable tool for HNIs who want to grow and protect their
wealth in today’s fast-changing investment landscape.

At Bonanza Portfolio Management Services, we go beyond just diversification and risk management. Our personalized PMS approach has consistently delivered impressive absolute returns of 1000%, making us a trusted partner for HNIs seeking long-term wealth creation. With a focus on individual financial goals, tactical asset allocation, and active portfolio management, Bonanza PMS ensures that your wealth not only grows but thrives in the face of market fluctuations. Time again being ranked at one of the top PMS at PMS Bazaar Ranking, it is a testimony that our expert team’s deep market insights and strategies are designed to maximize gains while mitigating risks, giving you the confidence and peace of mind that your investments are in safe hands.

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The economy and stock market are frequently discussed concurrently, giving the impression that they may be the same thing. The stock market and the economy have never had a reliable relationship. Just to be clear, the economy is not the stock market. Even though they generally move in the same direction over the long term.

Investors can buy and sell investments on the stock market, most frequently stocks, which are ownership shares in public companies. When discussing the stock market, people frequently use one of the important indexes, such as the Nifty 50. This is because it is challenging to keep track of every stock and because these indexes are thought to accurately reflect the entire market.

The connection between production and consumption activities, which controls how resources are distributed, is the economy. The purpose of producing goods and services is to meet the demands of consumers. This, to put it simply, is our economic system.

To understand stock market prices and their future trends, investors and traders frequently scan the economic data. Additionally, some monitor market indices to get a sense of the state of the economy.

Generally speaking, but not always, the stock market and economy move in lockstep with one another. Due to market volatility, it is possible for stock prices to fall in good economic times as well as rise in bad ones. The stock market prices are likely to reflect the same sentiment if the GDP is increasing and the economy appears to be improving, though not always in the short term.

It is reasonable to assert that the markets do not always accurately reflect the state of the economy because the stock markets react quickly, if sharply, to events that may have little long-term significance. The markets are frequently criticized by traders and investors for “overreacting” or for “not properly accounting for a particular move.”

In fact, several factors that don’t directly affect the country’s economy can have an impact on the markets. For instance, the economy may not necessarily be affected by geopolitics, natural disasters, interest rates, or tax rates, but they all influence stock prices. Like how any change to the law that could have an impact on dividends or share buybacks would have an impact on share prices but not GDP.

High expectations that are already reflected in stock prices before they have any effect on the economy are another factor that can cause discrepancies in the markets and economy. As a result, when the overall economy grows, the markets do not soar because stock prices already take into account investor sentiment.

It is undeniable that, over time, the economy as well as markets tend to trend in the same general direction. However, the financial markets tend to react in an extreme way (on either side) to news events and policy reports that might not have any bearing on a nation’s macroeconomic fundamentals.

Understanding how the stock market and economy interact can help you as an investor process economic news and maintain your long-term perspective. To reduce the risks brought on by the highs and lows of economic and market cycles, it is crucial to diversify your portfolio well across a variety of asset classes. This can assist you in avoiding the common pitfalls investors make and make it simpler to stay the course through all market conditions.

(This article is written by Mr. Achin Goel, vice president at Bonanza Portfolio Limited. This article was recently published in the economic times. Read here.)

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Global central banks have become overzealous in their efforts to control inflation. The US Federal Reserve raised its key interest rate by 75 basis points for the third time this year in September. The Fed’s rate hike demonstrated its commitment to lowering inflation in the United States, it is at a four-decade high of 8.5 percent. The Fed’s rate hikes are aimed to cool an overheated US economy and force people out of work, putting downward pressure on wages and inflation.

India’s economy has been moderately integrated with the global economy, but it is not invulnerable to the US or global recession. Even in typical Fed-driven recessions, the domestic rate of growth has slowed by 1.5% to 2.5%. This recession, in contrast to other shallow recessions, is expected to be long and unpleasant.

According to the data, India contributes a relatively small amount to the world’s exports (2.2%), and even when it comes to GDP, it is still low when compared to other nations. However, the trade route will have some effect on India. Five countries together account for about 30% of India’s total exports, including the US and the EU. Additionally, a significant portion of international exports are dependent on the US.

The United States’ percentage of India’s exports of goods increased from 10.1 percent in FY2011 to 18.1 percent in FY2022. India’s susceptibility to a US economic downturn has undoubtedly increased as the US market share in its exports has grown. With a share of 54.8% in FY2021, the US accounted for most of India’s software exports. A US recession will undoubtedly have a significant negative effect on India’s software exports, margins, and employment in the service sector.

Foreign Portfolio Investment (FPI) fund flows, forex reserves, and the rupee have already begun to be impacted by Fed rate increases. As the Dollar keeps getting stronger following the Fed’s most recent 75 basis point jumbo rate hike, the declining Rupee is coming under new pressure. The Rupee is falling to new lows because of rising crude oil prices, continued Fed rate hike expectations, and the expanding current account deficit.

The rate cycle of the RBI may not be opposite to that of the Fed, and rate increases will undoubtedly have an impact on India’s economic growth. To reinstate a pretense of price stability without stifling growth, the RBI’s monetary policy panel must walk a fine line between two opposing objectives. On September 30, the RBI raised the repo rate by 50 basis points, to 5.9%.

All this puts India’s growth rate, current account deficit, macroeconomic stability, and currency at risk. The Indian economy will continue its current course, according to Finance Minister Nirmala Sitharaman, despite the global economic challenges. Even though India’s economy is not fully integrated with the global economy, policymakers there cannot ignore the global headwinds. Even though a moderate growth rate of around 5% (as predicted by UNCTAD) would still rank India as having the “fastest growing economy,” millions would still be forced into poverty. The poorest people will be hit the hardest by rising inflation as a result of currency depreciation and widening “twin deficits,” which will further fuel it.

(This article is written by Achin Goel and was published in Economic Times on December 5, 2022)

Link to the economic times article: https://economictimes.indiatimes.com/markets/stocks/news/can-india-escape-the-effects-of-a-global-recession/articleshow/95997892.cms

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India’s economic growth was projected to grow by 6.8% in 2022 by the IMF, down from its earlier estimates of 7.4% in July and 8.2% in January. This follows the World Bank’s downgrading of India’s anticipated GDP for the current fiscal year to 6.5% earlier this month. The Reserve Bank of India estimated a real GDP of 7% last month.

As per IMF’s most recent World Economic Outlook, almost a third of the global economy will contract this year or the following year, and the economies of the United States, the European Union, and China will remain stagnant.

According to the IMF, the world economy has suffered numerous setbacks, such as the war in Ukraine, which has increased the cost of food and energy, COVID-19 and its impact on economic systems, as well as escalating prices and increasing rates of interest. Given that the global slowdown has already started to affect India’s export earnings and industrial activity, the country’s growth is likely to slow over the next two years. Additionally, as interest rate increases are more widely felt by consumers and contact-based services lose some of their competitive edges, domestic demand may be put under pressure.

5 Factors that will contribute to this are:

1. Weakening Rupee

A sharp decline in activity will be difficult to avoid for advanced nations as central banks aggressively raise rates to combat inflation. Concerns over the outflow of foreign funds have arisen due to the narrowing of interest rates, which could ultimately increase the pressure on the rupee to depreciate. Although a weakening rupee helps exports to a certain extent, the impact of sluggish demand, which is a key factor in export growth, overshadows it. Slowing exports and fluctuating foreign portfolio investment (FPI) inflows are already beginning to be felt in India because of tightening monetary policy and diminishing growth momentum in advanced economies. The growth pullback in the advanced economies has not only put pressure on exports of goods and services but also on tourism, and remittances.

2. Decline in Exports

Since July 2022, India’s exports, especially those that are not oil, have been declining. India’s exports to the US decreased significantly on a year-over-year basis by 0.4% in September compared to 28.7% in June and to the EU by 2.8% from 38.9%. Export volume declines have impacted domestic industrial growth. The impact of the global slowdown on Indian exports may also deteriorate income prospects in labor-intensive manufacturing sectors like textiles and gem and jewelry.

3. Decrease in the consumption of consumer goods

Two-wheeler revenue continues to lag corresponding levels even though passenger vehicle revenues have already been growing by double digits since May 2022 and have surpassed pre-pandemic levels. Since March 2022, even consumer non-durables have experienced the biggest growth decline among the major IIP components. From September through October 2022, the trend for core imports was to slow down. IIP has decreased for both consumer durables and nondurables, possibly due to a decline in demand.

4. Unfavourable weather conditions

The weather’s whims have an impact on rural income prospects. This year’s unusual weather conditions had an impact on agricultural production. The wheat crop was harmed at the time of harvesting due to the heatwave that occurred from March to May. Rains that were later than expected hurt the rice crop’s sowing. Finally, several Kharif crops that were about to be harvested were damaged by excessive rain in October. Although India experienced excessive rains in October of the previous year as well, their quantity and duration were noticeably greater in 2022. The frequency of extreme weather events indicates a greater problem.

5. Shortage in the food supply

Wheat supply constraints will lead to increased cereal inflation till the rabi season. Furthermore, even after rice buffers, reduced rice kharif sowing is driving up crop prices. Because of the postponed monsoon withdrawal and seasonal demand, vegetables will experience elevated inflation until November. Retail prices for onions and tomatoes have already risen by double digits year on year in October. Geopolitical tensions continue to have an impact on international energy prices.

Despite the short-term slowdown, India is expected to remain a growth outperformer in the medium term, with Crisil forecasting 6.6% GDP growth between fiscal years 2024 and 2026, compared to 3.1% globally — as estimated by the International Monetary Fund. India is also expected to outperform peers in the emerging market, including China, Indonesia, Turkey, and Brazil. In the medium term, relatively strong household consumption is expected to boost India’s growth premium over peers. Given the government’s capex push, the progress of the Production-linked Incentive (PLI) scheme, healthier corporate balance sheets, and a well-capitalized banking sector with low non-performing assets, investment prospects are upbeat. India is also likely to profit from the China-plus-one policy as the world’s supply chains are altered. Over the medium term, private consumption will contribute to increasing GDP growth.

(This article is written by Achin Goel and it was published on Livemint on December 2, 2022)

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As a result, the market remained under-penetrated, with customers preferring gold, real estate, and bank deposits as safe investments. However, much of this dynamic has shifted in the last 5-7 years. Bank deposit rates have fallen; real estate and gold have been difficult to profit from. Customers are increasingly interested in investing in financial assets. This is likely to be a 10-to-20-year transition in which Indians will demonstrate a strong preference for owning financial assets.

A classic Indian wealth client today is far well-versed than a decade ago. Based on the data of domestic inflows and outflows during market ups and downs, it is clear that the average Indian’s risk-taking ability has increased across income categories.

The wealth management industry is thriving. The international wealth management industry is anticipated to grow at a CAGR of 10.7% between 2021 and 2030, from USD 1.25 trillion in 2020 to USD 3.43 trillion by 2030.

Race for high-net-worth individuals (HNWIs) is also fiercer than ever. As a result, in order to remain important and capture a larger share of this growing market, businesses must keep up with the newest trends.

Let’s take a look at some of the emerging trends in this industry:

• The growing use of artificial intelligence is one of the industry’s developing trends (AI). AI can be used in a variety of ways to increase productivity, and profitability for wealth management firms, from customer acquisition to portfolio management and compliance.
• The explosion of smartphones and internet access has familiarised investors with the domain of technology. Investors are increasingly gravitating toward platforms with simple user interfaces that allow them to make investments with the swipe of a finger.
• Client-centricity is being ranked in the face of strong competition and margin pressure. This translates into a greater emphasis on customization and responsible goal-based wealth advisory, rather than simply financial product distribution. Wealth managers are rethinking their product strategy for their clients, taking into account cash flows as well as risk-adjusted returns.
• Companies have tried various new tactics to reach a younger demographic over the years. Financial institutes, such as banks and wealth management firms, have been bidding to reach millennials by modifying their offerings to this demographic.
• Another notable trend is the emphasis on asset diversification across financial and physical assets, as well as client recommendations to include foreign assets in their investment portfolio.
• As technology becomes more inescapable in our lives, an increasing number of businesses are proposing digital-only services. Digital firms are becoming more and more common in the wealth management industry. Digital wealth management firms provide their services solely through digital channels such as the internet and mobile applications, eschewing physical offices entirely.
• The rise of robust portfolio evaluation processes is another crucial trend in the wealth management industry. A human financial advisor may be the best choice for a client in some cases, but clients also expect some level of automation. In other words, they want their financial advisor to be able to create an investment strategy using technology and algorithms.

Wealth management is a competitive and difficult industry. Companies must keep up with the latest trends and adapt their services and offerings to meet the changing needs of their clients in order to thrive in this environment. Wealth managers are expected to curate differentiated ideas, stay ahead of the curve by uncovering opportunities, identify evolving trends, and efficiently execute them for investor portfolios in this environment. The above-mentioned points are just a few ways wealth management firms are attempting to expand their presence and stay ahead of the curve.

(This article has been published in Sunday Pioneer, Andhra Pradesh on October 9, 2022)

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According to the latest SEBI regulations, the minimum ticket size for investing in a PMS solution is Rs50 lakh. Anyone who’s investing in a PMS needs to understand why they need a PMS, the benefits, and how it fits their financial goals.

If you’re a beginner, you’ll need to look for several criteria before choosing the right PMS provider for your portfolio. These include the performance history, track record, manager’s performance, fee structure of the PMS, agreement on the type of PMS availed, and several other features.

Types of PMS

PMS is broadly categorized into the following three types:

Discretionary PMS— In this PMS type, the professional portfolio manager holds the discretion to the client’s portfolio. The investment strategies, planning, and execution rest with the fund manager, and as per their agreement terms, he can make the client’s investment decisions without his/her approval.

Non-Discretionary PMS — In this type, the investment decisions rest with the client, and the fund manager can suggest investment strategies, but the client can pick stocks and other investment products at their discretion. While the fund manager can execute trades for the client, the execution can only be done on the approval of the client.

Advisory PMS — In this type, the fund manager acts solely as an advisor, and the entire decision-making from stock selection to trade execution rests with the investor.

Another common question that most of us have come across as beginners is selecting the right investment tool. Whether it is between mutual funds, PMS, or an AIF, the choice always narrows down to what risks the investor is willing to take and whether the investment plan matches the financial aims.

PMS solutions are different from Mutual funds and AIFs. PMS provides personalized investment solutions, professional fund managers that take care of the client’s portfolio and plan investment and wealth creation strategies. Whereas in mutual funds and AIFs, you invest in a common pool of wealth that has contributions from other investors as well, and the manager distributes the wealth from the investment’s return among them.

Agreement & Fees Involved

The portfolio management service provides customised solutions to clients tailored to their risk profile and financial goals. The agreement between you and your PMS provider will lay out the service’s exact terms, including the type of PMS selected, roles of both parties, fee structure involved, lock-in period, exit load, etc. The investor is liable to pay several fees like fund management fee, performance fee, entry/exit load, brokerage fee and others.

Advantages of PMS

• Investment Philosophy
• Prudent Risk Management
• Long-term Wealth Creation
• Works in All Market Conditions
• Consistent Track Record

Role of Wealth Manager

The wealth manager in a portfolio management service has a crucial role to play. Not every investor has the complete know-how on the equity market investments and with the huge capital involved, it becomes even more necessary to have a professional who not only manages the current portfolio but devises strategies for wealth creation. Fund managers are highly adept, experienced individuals appointed by the PMS providers who ensure that the investor’s wealth creation journey is driven to their financial goals.

Professional wealth managers have a unique way of work where they select the best stocks, bonds and other financial instruments, strategise investments, mapping the client’s wealth creation plan surrounding their preferences and risk appetite.

Going with the common saying, it is not the market but the manager’s discretion that drives an investor’s portfolio performance. The fund manager’s power to judge and act with asset elements is again dependent on their skill, years of experience, past performance and history and their ability to lead the fund into beating the index.

Introduction to Bonanza PMS

The Bonanza Group’s industry-relevant experience of more than 25+ years, robust, competent leadership, and management team, makes us one of the largest financial services and broking houses in India.

Bonanza had its initiation in 1994, and since then its robust performance delivery makes this group one of India’s largest financial services and broking houses. Bonanza group consists of its six mega group companies that make up the pillars of its strength. The company’s outstanding performances, decades of industry-relevant experience, competent leadership, and tireless efforts have helped outperform its peers.

With our dedicated research team with years of experience and extensive market knowledge, we offer a bouquet of customized financial products. These include prime brokerage, Portfolio management, and distribution services that comprise Bonds, Real Estate, Mutual Fund Investments, Insurance, and depository services covering all financial domains.

Why Bonanza PMS?

Whether it is wealth management, asset management, or personalised investment portfolio products, all investments are subject to market risk. This risk demands proper research from the investor’s end before he/she picks their favorable investment solution. At Bonanza, we ride on this risk by analyzing market trends and striving to deliver the best returns on our clients’ investments through our industry-leading portfolio management services (PMS).

Having consistently outperformed the benchmark composite indices and other major indices, their CAGR is as follows: (the data below needs to be verified and updated to represent the latest returns)

• A CAGR of 6.8% is promised for 5-year investments.
• 2.9% CAGR for 7-year investments
• 8.7% CAGR for 10-year investments
• And, investments over 11 years get a 9.2% CAGR.

Risk Management

Liquidity — Top 10 Stocks <45% of Net Assets

Drawdown — Diversified Portfolio of Stocks

Governance — Gradual scaling-up of position reduces risks

Key Features

• Value and Growth-Oriented Approach
• Combined Fundamental & Technical Approach
• Ideal for Moderate to High-risk investors
• Actively Managed Multi-cap Portfolio
• Monitors Macro-Economic Environment
• Capital Conservation & Wealth Building

The post How do Portfolio Management Services Work? appeared first on Bonanza Wealth.

PMS has highly-experienced, professional wealth managers with years of industry expertise having varied roles as fund managers for the service provider’s several clients. These providers offering PMS solutions are registered with the Indian market capital regulator, SEBI (Securities and Exchange Board of India).

Even if the minimum investment criteria are fulfilled, it is not always necessary that each of us have the expertise and knowledge to manage our investments by ourselves. This is where the crucial role of fund managers comes into the picture. These professional wealth managers plan out investment strategies keeping the client’s financial goals in mind and taking due note of their risk-appetite and preferences for diversification and active portfolio management.

Fees Involved

The SEBI (Portfolio Managers) Regulations, 2020 state that the PMS provider can charge the investor fees under different categories as per the agreement. This agreement will have all the conditions laid out between both parties with respect to the type of PMS selected, the lock-in period, investment plans, the role of the wealth manager, and the fee involved. An investor is liable to pay several fees like fund management fee, performance fee, entry/exit load, brokerage fee, and others.

Discretionary VS Non-Discretionary PMS

The primary difference between a Discretionary and a Non-Discretionary PMS is that in the former case, the wealth manager holds the complete discretion on the client’s investments and need not seek approval before undertaking any action; whereas in the latter case, the complete decision-making authority to make investments rests with the investor and the manager here plays an advisory role planning out and suggesting investment strategies (and executes trades only on approval of the client).

In a Discretionary PMS, the investor’s funds are invested in financial securities, money market instruments, equities listed or traded on a recognized stock exchange, mutual funds units through a direct plan and cannot invest in unlisted securities. The new rules of the PMS restrict the Non-Discretionary fund managers to invest not more than 25% of the client’s AUM in unlisted securities, along with the permitted ones under the agreement.

Investment Approach

In portfolio management services, the professional wealth manager handles the client’s entire portfolio, unlike in mutual funds where the investors invest in a pool of funds with no customized solutions offered. PMS returns are greater than those from mutual funds with customized offerings and personalized active portfolio management.

Considering the investor’s short-term and long-term wealth creation goals, continuous and hassle-free portfolio management to invest in the ever-changing stock markets, having a professional approach becomes more crucial than ever. These professionals will be responsible for the portfolio management along with performance reporting, laying out investment strategies and other activities based on the client’s selected PMS type and their agreement laid out with the provider.

The report includes details such as portfolio value, securities involved, investment period, transaction rates, beneficial interest received in the form of bonus shares, dividend, etc., commissions paid, fee structure along with the detail of expenses involved in the period, and risk management by the manager for investment and disinvestment.

Can a PMS offer guaranteed returns?

According to SEBI regulations, the PMS cannot promise or offer indicative or guaranteed returns to any investor/client.

For any investor looking for investing in a portfolio management service, what they need to follow first is detailed research on the provider — the fund managers involved, their experience, past performances, and track history. Dig into previous reports published and gathered through sources, get in touch with friends and peers, and note first-hand reviews of the provider’s returns and performance.

About Bonanza PMS?

The Bonanza Group’s industry-relevant experience of more than 25+ years, robust, competent leadership, and management team make us one of the largest financial services and broking houses in India.

Advantages of investing in Bonanza PMS

• Long-term Growth

Proven PMS strategy for long-term growth, integrated with portfolio diversification and continuous monitoring. Maximization of returns on investment, through solid fund management and investment advisory services.

• Expertise in Analysis

Reliable risk management support and high-precision asset management solutions aimed at value addition. With an endeavor to give you the best, Bonanza provides a highly professional market analysis that enables us to address varying investment preferences and deliver maximum returns to our clients.

• Experienced Fund Managers

With our capable and trustworthy Portfolio Management Services managers, you can experience proficiency, talent, and expertise, all of which allow us to bring out the best in your portfolio of investments.

• End-to-end Support

With a complete array of services across all verticals in finance, Bonanza offers you the perfect blend of financial assistance to help set your goals and confidently achieve them. Functioning on an integrated and innovative platform to trade online and offline, we give our clients the undisputed edge in achieving results.

• Past Performance

Having consistently outperformed the benchmark composite indices and other major indices, their CAGR is as follows: (the data needs to be modified based on the latest available records)

1. A CAGR of 6.8% is promised for 5-year investments.
2. 2.9% CAGR for 7-year investments
3. 8.7% CAGR for 10-year investments
4. And, investments over 11 years get a 9.2% CAGR.

• Risk Management

Liquidity — Top 10 Stocks <45% of Net Assets

Drawdown — Diversified Portfolio of Stocks

Governance — Gradual scaling-up of position reduces risks

Bonanza Group’s dedicated research team with years of experience and extensive market knowledge offers a bouquet of customized financial products. These include prime brokerage, Portfolio management, and distribution services that comprise Bonds, Real Estate, Mutual Fund Investments, Insurance, and depository services covering all financial domains

The post Can PMS Offer Assured Return? Explained appeared first on Bonanza Wealth.

Certification requirements for Distributors, Staff of PMS

In Sep 2021, SEBI put in place certification requirements for associated persons engaged by portfolio managers as distributors or employees having decision-making authority related to fund management. These persons need to obtain certification from the National Institute of Securities Markets (NISM). As per SEBI’s requirements, the associated persons, engaged by a portfolio manager as a distributor of the PMS, and associated persons functioning as principal officers of a portfolio manager or an employee having decision-making authority related to fund management, will have to obtain certification from the NISM by passing the certification examination.

Disclosure of Client Deal Data

In Nov 2021, SEBI made all portfolio management service (PMS) providers, who handle investments of the rich and ultra-rich, to submit information on the quantum of various securities bought by different kinds of clients. This is aimed at raising the reporting standards of PMS. This is in addition to sharing fund inflows from various categories – corporates, non-corporates, non-residents, offshore funds, and provident funds and reporting exposures to various baskets of investments: listed stocks, along with a break-up of investments in large-cap shares, mid-cap and small-cap shares; listed debt securities and the quantum of holdings in papers with a credit rating of below triple-B; unlisted equity and debt; stock and commodity derivatives and mutual funds

Undertaking of Co-investment Portfolio Management Services:

SEBI amended the SEBI (Portfolio Managers) Regulations, 2020 in Dec 2021 to include co-investment portfolio management services. A manager of an AIF who is also a SEBI registered Portfolio Manager, and intends to offer Co-investment services through portfolio management route, can do so under prior intimation to SEBI. In terms of compliance, Portfolio Managers are required to submit a monthly report regarding their portfolio management activity, on SEBI Intermediaries Portal within 7 working days of the end of each month, which includes details of Co-investment offered by Portfolio Manager.

New norms for PMS firms changing control

In June 2022, SEBI asked portfolio managers undergoing a change in control to allow their clients to exit the existing schemes without any exit load. SEBI requires the portfolio management services (PMS) firms to inform their investors about changes in control at least a month before. Also, PMS firms undergoing a change in control will now have to seek prior SEBI approval through an online application. These changes will be effective from June 15, 2022. These changes have been brought into effect in order to enable existing investors/clients to take a well-informed decision regarding their current investments in the PMS undergoing change in management.

Capping of PMS Investment in Securities of Related Parties

SEBI, in a circular released on 26th August 2022, notified frameworks regarding investments by portfolio management scheme (PMS) service providers. The move is expected to ensure proper disclosure to investors, cap over-exposure to investments in securities of related parties and ensure most of the investments are done in quality securities. The new rules allow the investor more control over any ‘conflicted investments’ by the PMS manager.  These rules will, however, not be applicable for advisory portfolio management services, co-investment portfolio management services companies, and those companies that manage funds under government mandates.

Limits on Investment in Securities of Associates/Related Party

SEBI said that portfolio managers shall invest up to a maximum of 30% of their client’s portfolio in the securities of their own associated or related party. SEBI further classified and laid down limits for individual securities.

In the equity asset class, the limit for investment in a single associated or related party shall be 15% of the client’s assets under management (AUM). The limit for investment across multiple associates or related parties shall be 25% of the client’s AUM. For debt and hybrid securities, the limit for investments in a single associated or related party shall be 15%, and for multiple associates or related parties, 25%.

The overall limit for equity, debt and hybrid securities shall be 30%. The limits mentioned shall be applicable only to direct investments by Portfolio Managers in equity and debt/hybrid securities of their own associates/related parties and not to any investments in the Mutual Funds.

Prior Consent of Clients

To be able to make investments in the securities of associates or related parties, portfolio managers will need the prior consent of the client at the time of onboarding. Even for existing clients, fresh investments in such securities can be made only after obtaining consent from the client.

Credit Rating of Investments by Portfolio Managers

Portfolio managers shall not be allowed to invest funds of their clients’ funds “in unrated securities of their related parties or their associates”. Both in the case of discretionary and non-discretionary portfolios, managers shall not make any investment in below-investment-grade securities. However, managers may invest up to 10% of the assets under the management of such clients in unlisted unrated securities of issuers other than associates/related parties. Such mandated prudential limits on investments are expected to ensure high-credit-quality investments.

Disclosures with respect to Related Parties

Portfolio managers will have to provide their clients with a disclosure document with all the details of investments in related parties or associates, rectification policy, and credit ratings of investments in debt and hybrid securities.

Appendix:

Rules and Regulations announced as part of SEBI (Portfolio Managers) Regulations, 2020 (PMS Regulations)

Minimum ticket size & Net-worth Increase

The minimum ticket size for PMS investment increased from Rs 25 lakh to Rs 50 lakh. The minimum net worth of a PMS provider also witnessed a hike to Rs 5 crores from Rs 2 crores. The latter will act as a deterrent to keep the non-serious players at bay from the PMS industry. The hike was accounted for, by taking several factors into consideration like inflation, rising compliance costs, income levels, etc.

Restrictions on Investments

In India, there are primarily three types of PMS from which an investor can choose to fit his/her convenience and financial goals and objectives. These include the Discretionary, Non-Discretionary, and Advisory PMS types. In Discretionary, the sole investment decisions rest with the fund manager, who is the decision-making body. The new regulation implied for Discretionary fund managers restricts them to invest in listed securities only, mutual fund units, and specific money market instruments.

Clients opting for Discretionary PMS cannot be allowed to invest in unlisted securities, which includes units of Alternative Investment Funds (AIFs), Real Estate Investment Trusts (REITs), debt securities, shares, warrants, etc.

In the second Non-Discretionary type, the client holds the entire decision-making power, and the professional fund manager plans out investment strategies but cannot execute the trade without the consent of the client. In the third, the Advisory type, the professional fund manager only plays an advisory role to the client and holds no power to make investment decisions or execute the trade. With the restrictions mentioned above for Discretionary managers, the Non-Discretionary and Advisory Portfolio Managers cannot invest more than 25% of their AUM Assets under management (AUM) in unlisted securities. These restrictions on unlisted securities will help improve liquidity — a constant concern for PMS products.

This 25% limit in case of non-discretionary PMS again involves an active and a passive breach. In the former case, non-compliance would be reported if there is an investor action in accordance with corporate actions such as subscribing to a rights issue. However, a case of a corporate action such as a bonus issue, (that has no involvement of the investor) would be considered a passive breach of limits.

On Operational Expenses

The portfolio managers would not charge any upfront fees in any form to the client. Without any overall cap on the charges, just the operational costs, except the ones charged on brokerage, get capped at 0.5% of the corpus. This implies that ‘the operating expenses levied on the client for portfolio management services shall not exceed 0.5% a year of the client’s daily average asset under AUM.

There have been restrictions regulated on off-market transfers from or to client’s accounts (with certain exceptions) to facilitate operational convenience.

Performance Data Regulations

The performance report of PMS managers comes into regulation. They would be now required to have a standardized reporting manner. Compared to earlier, where the performance data was before the fees and expenses, the regulation states that Portfolio managers will now be required to report the performance data containing all details on costs and fees, including taxes. This will help the new investors do their research better with crisp information available.

Other Regulations

One of the reporting regulations involves acceptance of a standard nomenclature called the Investment Approach of Portfolio Managers that should be used in reporting and disclosure documents of PMS.

Another regulation aims at enhancing the eligibility criteria for the PMS’s principal officer role. This additional person employed by the PMS provider will be holding the roles and responsibilities along with the principal officer and the compliance officer.

A recommendation for the distributors coming from the SEBI Working Group states that those who have passed the National Institute of Securities Markets (NISM) exams and are already registered with the Association of Mutual Funds in India (Amfi) would be permitted to distribute PMS products.

Mandatory Appointment of a Custodian

Custodian appointments are mandatory for all PMS providers (except for the ones offering Advisory services only). This custodian will act as a third-party who’ll indeed hold all of the client’s financial securities. This rule is aimed to provide protection to the investors in case the PMS providers go bankrupt.

These regulations proposed and changes implemented are the right steps in increasing not only investor’s trust with improved portfolio management service’s transparency but also to bring about standardization in the industry. Improving for a better understanding and transparency with the clients, these rules will cater to enhanced communication and trust.

The Bonanza Group, with the industry-relevant experience of more than 25+ years, robust, competent leadership, and management team, makes us one of the largest financial services and broking houses in India. With our dedicated research team with years of experience and extensive market knowledge, we offer a bouquet of customized financial products. These include prime brokerage, Portfolio management and distribution services that comprise Bonds, Real Estate, Mutual Fund Investments, Insurance and depository services covering all financial domains.

Our clients benefit from our proven long-term investment approach, experienced fund managers, prompt assistance, wealth creation, prudent risk management, sector-agnostic approach. Add more profits to your portfolio with Bonanza PMS!

Invest right with Bonanza Portfolio Management Services.

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