PMS Funds - India

So aptly put. Great.


Nothing against Mr. Maheshwari, but I think this contention about AUM weighted returns is not really correct. If you look at the SEBI reported returns, the PMS has underperformed the other funds both in months when the markets (and other PMS’s) have done poorly, as well as in those months when the markets(and other PMS’s) have done well.

Yes, since the PMS originated only in March 2016 or so, there has been a sharp increase in the AUM over the year. I agree that it is not worth measuring returns over a short time. But it is not appropriate to ask the PMS manager to self report on some self designed metric. It is best if we go by statutory reports, which pit all schemes and managers at par.

For me PMS evaluation criteria remains same and nothing less than that of Mutual Funds, i.e. 3 Years bare minimum, but only if supported by 5 years performance. Discussing any thing on monthly return has got no meaning. why SEBI could not find some means like MF to report long term return, i am surprised.

Apart from that Teji (Bull) time, is like 16 year old young who always looks handsome and/or beautiful. One need to assess these parameters over little longer life cycle to find something meaningful.


Few more of my learnings by being a part of this industry, given that some of you are searching for fund managers. Hope that my own extensive industry experience and reading/reseach in this regard helps you all in proper manager selection.

1.In general, as I have indicated in my earlier post, standalone focused portfolio managers or SEBI registered investment advisors are far more preferable over corporate houses or those whose main business is not equity asset management. This is especially true for those where this is a marginal business. Globally, the best of the investors do only thing - invest. Be it private equity (Blackstone, Warburg Pincus) or public equities (Berkshire Hathway, Baupost) - all the best investors generally do not belong to the corporate houses. The reason is very simple - the best of the fund managers know that they are the best and even a Prashant Jain (HDFC CIO, India’s best-known MF Manager) salary is no match to what a much smaller guy like Ashish Kacholia (Lucky securities, net worth of over 750 cr) can make. So the best of fund managers always start on their own leaving behind the corporate house. However, you have to be able to have trust on the standalone managers you invest with.

Secondly, for the corporate, this is just one of the many businesses, they never have the focus on this. And focus is everything in business. Please read a gem on marketing called Focus by Al Ries to know more of what I am trying to say here.

Thirdly, equity asset management if done rightly produces very lumpy results - something which most publicly listed and large groups hate. A Motilal would never like to charge a ‘profit share only’ because then the earnings line would be very volatile. But then, that’s precisely the problem - creation of wrong incentives in the system to accumulate assets rather than show performance. Don’t we all hate businesses which are just focused on revenues and scale rather than RoE and RoIC?

2.With regards to fee, I would advise not to be overly focused on fees (please read the example in this point which I am giving). The Bottomline is - unless the fees is totally out of whack it does make a lot of sense to go for the best manager (trust, integrity, pedigree, right incentives) rather than haggle about few % points of fees here and there. Managers who have high degree of integrity, a long-term outlook (they are not there to make a quick buck but to create a lasting organization for 20-50 years plus) and work always towards enhancing their skill sets will always create greater long-term returns (even though somebody else’s performance might look sexier in the recent past) because they will never expose you to risk so much that the portfolio value or investor’s interest itself goes away. This analogy is similar to buying a TBZ stock or a Titan stock. While TBZ may trade at 15 times and Titan at 30 times, if you are looking to compound your wealth over 20-25 years, I would pick Titan over TBZ anyday (although as a value investor with an option to buy nothing, I would buy none of the stock currently). So don’t overly worry about fees, the game of money management is such that best of money managers are destined to be filthy rich, as layman investors who have other work to do and we are not full time investors, we need to focus on whether the a) manager is highly skilled, b) manager is generally risk averse and conservative, c) manager is man of words, integrity and d) most importanltly, whether he is making money when I make money - meaning whether rewards of investor and manager are properly aligned.

In this regards, the world’s best performing hedge fund (medallion, has probably made returns double/triple of warren buffett in the last two decades) charges 5% fixed fee and 44% profit share ( While I am not recommending paying this much :slight_smile, do focus on manager’s skills & incentives much much more than fees for your long term benefit.


Very Aptly put - Corporates Fund Houses have to generate stable income and this cnnot be done with PMS/AM businesses…Quality will come at a price be it stock OR fund manager. Few % here and there shouldnt be a matter of concern as thats the price someone should be willing to pay for a good guy rather than being penny wise

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.


For investment advisors, Sebi seeks to relax registration rules. Few such proposed amendments are lowering the application fees for corporate applicants, for initial 5 years, to Rs.10,000 from Rs.25,000. Registration fees to be halved to Rs.1 lac. Net worth requirements should be reduced to Rs.10 lacs from the current requirement of Rs.25 lacs.

But I dont think PMS managers will reduce their net requirement. they would
rather have few clients with high corpus… Makes it less work for them.


can any one share their views regarding ashish chugh’s investment advisory
i couldn’t find the cagr for his advisory

Is anyone invested in Mr. manish Bhandari’s pms or has a feedback, kindly Share!

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yes please share his style and personal experience if anyone have

You can also check dhfl pramerica deep value PMS… E A Sundaram is the fund manager… Conservative but has great companies in the portfolio. Not a typical midcap portfolio…

@Yatharth … Was away for a few days hence a late reply.

Checkout the returns over a 3 or 5 year period. Data doesn’t lie. Quest, Nine Rivers, Vallum have CAGR above 45% as on Dec 2016 for a 3+ year period.

Where do we get this authentic long term performance data. Link if any please post.

Yes, how do we get this data? Nine Rivers and Quest in the last 2 years seems to have done <25% CAGR only as per SEBI data. Name of Vallum PMS scheme on Sebi is not known to me. Can some one help?

Master portfolio services ltd - vallum india discovery fund

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Since a lot of you are looking at various PMS funds/advisory firms performance data, let me explain to you all what does the performance data signifies (and hence why in many ways it is completely irrelevant) and hence what should an investor look for. I will also explain to you what is the difference between a fund - PE fund, AIF CAT3 fund, Mutual fund (MF) performance data and why it is much superior to PMS/advisory firm data. For any additional queries, you can always ping me. Whenever I use PMS here - I mean all kinds of non-pooled vehicle including advisory and whenever I mean MF - I mean all kinds of pooled vehicle including private equity, hedge funds and AIF Category 3 funds.

  1. The fundamental difference between a PMS performance data (which is there in public at times through SEBI website or through PMS website) and MF performance data is that MF performance data is much more credible because MF is a pooled investment vehicle and PMS is a non-pooled investment vehicle. Hence MF data is an IRR data which also gives an accurate picture of decision quality of MF in areas like - when did the MF take the money initially and intermittently, at what levels it bought various securities post-launch, when did MF redeem the money, at what levels it sold various securities post launch.

On the other hand, a PMS firm shows the performance data as the performance of the first client in its website/marketing material etc (since it is a non-pooled vehicle). So let’s say the first client was added to PMS when the NIFTY was 6000. Soon enough market rises to 9000 and 10 more clients were added to that levels. In this case assuming the PMS bought the entire NIFTY, it will show its performance as 50% since inception, even though 10 out of 11 clients will be at 0% returns. Now let’s say market falls to 8000. In this case, PMS will show its performance as 33% even though 10 out of 11 clients will be sitting at a loss of 11%. This is the single biggest anomaly of PMS firms and the same applies to investment advisory firms. Most investors don’t realise that proper investment management performance assessment can only be done if its a pooled vehicle and not a non-pooled vehicle.

For an investment management firm, equally important is when to take in money from the investors, what levels various investors are entering and what levels investors are redeeming - all these important factors are accounted in a mutual fund performance because of its NAV based but not in a PMS/advisory firm’s reported performance. Also, AIF Category 3 and private equity funds are also NAV based and hence their performance track record is also credible.

The problem is that PMS firms/advisory firms etc. - performance varies significantly from client to client. I know of PMS firms which started in Feb of 2016 and are showing great performance even though the bulk of the money has come now and is sitting on almost zero profits. This is also the reason why most of them love to charge fixed fees these days and rely very little on profit share. So just by looking at a PMS firm performance, you can’t assume that your returns will be a similar levels - crucially if you are investing at the top end of the market cycle, you are most likely to loose money irrespective of past performance of any vehicle - only an extremely good manager can save you from this potential loss (even when you invest at the top) - these managers are rare and most wouldn’t waste their time coming on CNBC TV18 and other such entertainment channels.

  1. The second fundamental and equally important fact (and I am telling you from my own personal experience of reading and managing money) are that PMS firms/advisory firms, in general, because of their structural flaw, will reduce the investor performance (everything else remaining the same, ceteris paribus some say).

Let’s say I am an MF/AIF CAT3/PE fund and I am managing 100 cr and I have a portfolio of just 4 stocks - Bajaj Fin (25%), Eicher Motors (25%), RBL (25%), Infosys(25%). Now currently Bajaj Fin, Eicher Motors and RBL are trading very expensively and Infosys is trading very cheaply. Let’s say Mr A becomes a new investor and invests 1 cr in the fund. Now a smart and well-incentivised MF manager (and sadly there aren’t many in the industry) will just use that 1 cr to buy Infosys so that portfolio changes to Eichers Motors, RBL, Bajaj fin (24.5% each - a reduction in expensive stocks) and 26% in Infosys (a increase in cheap stock) - which is what is ideal.

However because PMS/advisory is a non-pooled vehicle and they have typically only one model portfolio and because of millions other wrong incentives - the PMS manager will not want to alter the portfolio just because a new client has come in - else he will have to do buy and sell for all the clients and all the stocks - which will also create a lot of unnecessary brokerage cost and short term gains tax. So for the new investor, he will buy stocks in the same proportion - hence he will end up buying 3/4th of the portfolio at very expensive valuation for the new investors while also not reducing the weightage of expensive stocks for everybody else. This is the single biggest structural problem in PMS/advisory. This can be solved if he starts a new model portfolio for each client based on then market conditions - but that is just not scalable solution for any of the large PMS/advisory firm. This is the reason a lot of such firms are buying Canfin homes, Bajaj Fin and other expensive stocks for the new investors - I am not saying that these will necessarily lead to loss but buying a stock without a margin of safety is a bad deal irrespective of a whether or not it makes money.

Most importantly, a PMS firm hardly cares so much about all the follow on clients money and at levels shares are being bought because a) it reports only the first client performance and doesn’t have to worry about the performance of subsequent clients and b) in most cases fees is anyways being charged at fixed and not variable.

I know all of this might have sounded technically difficuly to grasp, happy to help with the queries on the same.


I have a very basic question and please ignore my ignorance … when I hear the word PMS, I always assumed that the firm managing my portfolio will identify the right stocks based on let’s say my age, income, future needs , etc and create a portfolio based on what is suitable for me… so I always thought that most (if not all) portfolios will be different … but based on what is shared here (and very thankful for that), this does not seem to be the case …

VIDF - Monthly Returns Apr 2017.pdf (251.5 KB)

Returns for Vallum India Fund. Kindly share your inference!

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This is an eye-opener. Thanks a lot for detailed information.

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