As part of our review of various Portfolio Management ServiceS (PMS) here is one on Motilal Oswal Asset Management Company Ltd. The AMC of the eponymous broking firm has 14 different types of PMS strategies, while they are managed by just three fund managers – Manish Sonthalia, Mythili Balakrishnan and Kunal Jadhwani.
Manish Sonthalia is the Chief Investment Officer at Motilal Oswal and has over 22 years of experience in research and fund management. Mythili Balakrishnan has over 13 years experience in finance with previous stints at Avezo, Nalanda and JP Morgan. Kunal Jadhwani has over nine years of experience in Indian equities and has been part of the Motilal Oswal PMS/AIF business for the past four years.
The PMS had 21,833 customers across various strategies and managed about Rs 9,800 crore as of end-FY 2016-17.
What is a PMS?
For the uninitiated, a PMS manages a portfolio of stocks on your behalf. It is similar to an equity mutual fund but there are key differences. A mutual fund pools money from several investors and issues units in lieu of its assets. These units have a Net Asset Value or NAV which is declared on each business day. A PMS does not pool your money with other people’s and does not issue units.
The stocks in the PMS are held in your own name and your money in the PMS is held separately from that of other investors. Unlike a mutual fund, you can also transfer your existing stocks to a PMS. In other words, you give your existing stock portfolio to the PMS manager to manage.
PMS services have a minimum ticket size of Rs 25 lakh.
The tables below give you the strategies and the returns of the 14 Motilal Oswal PMS products.
|1.||Value Strategy||Benchmark||Fund Manager|
|Invests in businesses run by great managers for wealth creation||Nifty 50||Manish Sonthalia|
|2.||Discover Value Strategy||Benchmark||Fund Manager|
|Invests in large unpopular businesses with dominant market share and potential for growth||Nifty 50||Manish Sonthalia|
|3.||Next Trillion Dollar Opportunity Strategy||Benchmark||Fund Manager|
|Invests in sectors that can benefit from the Next Trillion-Dollar GDP growth. Identifying winners in small and midcap stocks||Nifty Free-float Midcap 100||Manish Sonthalia|
|4.||Focused (Series V) – A Contra Strategy||Benchmark||Fund Manager|
|Invests in fundamentally sound companies that can benefit from changes in the company’s valuation||BSE 200||Manish Sonthalia|
|5.||Liquid Strategy||Benchmark||Fund Manager|
|Invests in liquid funds, short-term debt funds and money market funds||N/A||Manish Sonthalia|
|6.||Structured Products Investments Strategy||Benchmark||Fund Manager|
|Invests to achieve growth as well as capital preservation. PMS will also invest in NCDs.||N/A||Manish Sonthalia|
|7.||India Opportunity Portfolio Strategy||Benchmark||Fund Manager|
|Invests in a focused portfolio of high growth stocks which have the potential to grow faster than nominal GDP||BSE 200||Manish Sonthalia and Mythili Balakrishnan|
|8.||PLUS strategy – Portfolio of less recognized or undervalued stocks||Benchmark||Fund Manager|
|Invests in less recognized and/or undervalued stocks.||Nifty Midcap 100||Manish Sonthalia|
|Deep Value Portfolio||Benchmark||Fund Manager|
|9.||Invests in fundamentally sound stocks to capitalize on the difference between market value and intrinsic value of business||Nifty Midcap 100||Manish Sonthalia|
|10.||Motilal Oswal ETF Assets and Securities Portfolio Strategy (FEATS)||Benchmark||Fund Manager|
|Invests in low-cost ETFs, funds and securities to achieve a diversified asset allocation for investors with different risk profiles.||None||Kunal Jadhwani|
|11.||Motilal Oswal MOst Allocation Portfolio Strategy (MAPS)||Benchmark||Fund Manager|
|Invests in equity, debt and mutual funds according to one of three sub-plans – based on valuation ratios, based on quantitative measures and based on risk profiles||N/A||Kunal Jadhwani|
|12.||Emergence Portfolio Strategy||Benchmark||Fund Manager|
|Invests in a focused portfolio of high-growth businesses that can grow faster than India’s nominal GDP and which are available at reasonable prices||BSE 200||Kunal Jadhwani|
|13.||Focused Opportunities Strategy||Benchmark||Fund Manager|
|Investing in a bottom-up manner by identifying high-quality companies having superior growth and a sustainable competitive advantage||Nifty Midcap 100||Kunal Jadhwani|
|14.||India Invest Portfolio Strategy||Benchmark||Fund Manager|
|Investing in stocks and sectors (predominantly small and mid-cap) that will benefit from India’s emerging businesses||N/A||Manish Sonthalia, Mythili Balakrishnan|
Returns of various PMS strategies
|Strategy Name||Report Period (Years)||Fund Returns CAGR %||Benchmark Return CAGR %||Outperform?|
|Next Trillion Dollar Opportunity||3.5||28.47||19.94||Yes|
|India Portfolio Opportunity||3.5||14.35||14.06||Yes|
|Focused (Series V) – Contra||3.5||18.63||8.82||Yes|
|Deep Value Strategy||2.5||32.00||17.92||Yes|
Source: Motilal Oswal PMS disclosure report to SEBI on 20th September 2017
As you will note from the tables above, the vast majority of PMS strategies have outperformed their benchmarks. However, there are two important disclaimers:
- These returns do not account for taxes. Unlike mutual funds, you pay tax on the gains made by the PMS whether or not you redeem your money from the PMS. The tax rate is 15% for short-term capital gains in equities and from FY 19 is 10% for long-term capital gains.
- These returns were achieved in relatively bull-market years. The real mettle of the PMS strategies can only be tested in a bear market.