Can PMS Offer Assured Return? Explained

When investors evaluate discretionary or non-discretionary Portfolio Management Services (PMS), one of the most common questions that arises is whether PMS investment returns can ever be assured or guaranteed. As wealth creation becomes a priority and PMS continues to gain popularity among HNIs and sophisticated investors, understanding the realities behind return expectations becomes crucial. In this article, we break down the truth behind “assured returns,” how PMS actually works, and what investors should realistically expect.

What does PMS really offer?

Portfolio Management Services (PMS) are investment tools that can be customized specifically for high net-worth individuals (HNIs). With a minimum ticket size of Rs 50 lakh, these investments are favored by high-end investors having huge investment capital and looking for professional wealth management solutions.

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. A large part of achieving better PMS investment returns depends on the manager’s skill, strategy, and timely decision-making.

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.

The type you choose directly impacts your PMS investment returns, as discretionary PMS generally offers more agility in decision-making.

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 investment 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?

While PMS investment returns can be strong due to expert management, SEBI clearly states that no PMS provider can guarantee or promise fixed returns.

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 Wealth 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

1. Long-term Growth

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

2, 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.

3. Experienced Fund Managers

Our seasoned portfolio management services managers bring deep market insights and strategic skill, enabling better performance and strengthened PMS investment returns.

4. End-to-end Support

With a complete array of services across all verticals in finance, Bonanza Wealth 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.

5. 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)

• 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.

Past returns help investors assess potential PMS investment returns, but future returns remain market-dependent.

6. Risk Management

• Liquidity: Top 10 Stocks <45% of Net Assets
• Drawdown: Diversified Portfolio of Stocks
• Governance: Gradual scaling-up of position reduces risks

Conclusion

While PMS cannot guarantee returns, choosing the right provider can significantly influence your PMS investment returns. Bonanza Wealth’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.

To explore Bonanza Wealth PMS further, connect with us on LinkedIn, Instagram, and Twitter.