{"id":113792,"date":"2021-02-22T11:48:58","date_gmt":"2021-02-22T11:48:58","guid":{"rendered":"https:\/\/precoinnews.com\/?p=113792"},"modified":"2021-02-22T11:48:58","modified_gmt":"2021-02-22T11:48:58","slug":"why-large-cap-pms-schemes-failed-to-beat-benchmark-index","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/why-large-cap-pms-schemes-failed-to-beat-benchmark-index\/","title":{"rendered":"Why large-cap PMS schemes failed to beat benchmark index"},"content":{"rendered":"
Only around 44% of PMS schemes did better, among the schemes investing in large-cap companies.<\/strong><\/p>\n <\/strong><\/p>\n Companies providing portfolio management services (PMS) had a tough time beating the benchmark index in January, with more than half of the schemes invested in large companies underperforming in the run-up to the Union Budget.<\/p>\n The Nifty 50 index was down 2.5 per cent during the month.<\/p>\n Only around 44 per cent of PMS schemes did better, among the schemes investing in large-cap companies.<\/p>\n The analysis is based on data from industry tracker PMS Bazaar.<\/p>\n Half the mid-cap schemes outperformed, while the rest underperformed.<\/p>\n The ratio improved for multi-cap schemes where around 62.2 per cent of the schemes gave higher returns than the corresponding benchmark.<\/p>\n Small-cap schemes were the major outperformers.<\/p>\n Around 10 schemes did better than the index out of the dozen schemes for which data was available.<\/p>\n A total of 159 schemes was considered for the analysis across categories.<\/p>\n Returns were calculated on a time-weighted rate of return basis for the schemes under consideration.<\/p>\n The time-weighted rate of return eliminates the effects of inflows and withdrawals from the schemes to get a clearer sense of the fund manager’s performance.<\/p>\n The PMS segment invests money on behalf of well-off individuals.<\/p>\n The minimum investment that regulations allow is Rs 50 lakhs. It was Rs 25 lakhs earlier.<\/p>\n The Securities and Exchange Board of India (Sebi) had sought to increase the amount to amount as part of a larger tightening of PMS regulations.<\/p>\n This also included increasing net worth requirements and compliance standards.<\/p>\n There are currently 361 registered portfolio managers as per the latest Sebi data.<\/p>\n “There were 1,55,796 total clients in PMS industry as at the end of October 2020, of which 1,45,404 clients belong to discretionary services category, 8,409 clients belong to non-discretionary services category and 1,983 clients belong to advisory services category of portfolio management services,” said the January Sebi bulletin.<\/p>\n It pegged the assets under management at Rs 19.2 trillion.<\/p>\n Around Rs 14.6 trillion was provident fund capital that asset managers count under PMS assets.<\/p>\n Daniel GM, founder-director at industry-tracker PMS Bazaar said that the correction of a few large companies ahead of the Budget contributed to the underperformance since they were held by multiple players.<\/p>\n The PMS segment typically has higher volatility and should also do better when markets rise, he added.<\/p>\n Suresh Sadagopan, founder of the Ladder7 Financial Advisories who advises clients investing in PMS schemes says that the case for large-cap schemes is becoming weaker as Indian markets become more like developed ones.<\/p>\n Passive funds seeking to replicate index performance rather than beat it are more the norm in places like the United States of America (USA or the US).<\/p>\n Investors there prefer such funds since most fund managers find it hard to beat the market.<\/p>\n “I think we are moving the US way,” he said.<\/p>\n Schemes investing in the mid-cap or small-cap space where companies are less well-known could be the ones to add more value, according to him.<\/p>\n The multi-cap schemes under consideration had assets of Rs 55,438 crore.<\/p>\n The assets across large-cap, mid-cap and small-cap companies was a total of over Rs 6,300 crore.<\/p>\n This is based on disclosed assets. Many have not provided information on the assets that they manage.<\/p>\n