High PMS fees may be the reason why investors create shadow portfolios that mirror PMS portfolio. SEBI rule require that a separate account is maintained for each PMS client so client will know in near real time what stocks the manager is buying and selling and can mirror those transactions in real time. In fact a savvy investor can hire a broker to just do that for a small brokerage instead of paying hefty fees to PMS manager. No wonder most PMS accounts are between 25 lakhs to 50 lakhs even after years or producing stellar returns.
Skilled PMS managers will move to AIF structure as it allows pooling of funds and does not require manager to report transactions to investors in real time. Some are already planning a move.
Equity Intelligence launches new product – AIF
Some PMS have realized that a PMS portfolio is just a concentrated mutual fund portfolio so they are using a MF structure especially if the PMS service is already a part of an AMC. In fact in the past I built a concentrated portfolio using the top 10 positions of a top rated mutual fund and found that a concentrated portfolio beats the diversified portfolio from which it is derived.