Portfolio management service or PMSPhillipCapital has launched a new strategy under its discretionary Portfolio Management Services (PMS) platform Phillip Star Portfolio. In this offering, the PMS investor’s financial resources will be invested into cherry picked mutual fund schemes, instead of stocks. It provides benefit of having diverse funds, management style and various funds available under one roof. RupeeIQ decodes the PMS offering.

Offering – The Phillip Star Portfolio appears to be a multi-manager portfolio of mutual funds. This is a PMS offering from PhillipCapital (India) Pvt. Ltd – SEBI Portfolio Management Service Regn no: INP000004433.

Readers of RupeeIQ may note that some fund-houses offer fund of funds (FoF) where MF money of an investor is invested into different funds. Most large fund-houses have FoFs that invest in their own schemes. However, there are some FoFs that invest in MFs across AMCs.

Too many funds – A big problem when it comes to investing in mutual funds is the sheer number of schemes.

There are over 40 Asset Management Companies (AMC). There are more than 1500 mutual fund schemes. Most investors do not have the time, knowledge and expertise to select the right mutual fund schemes.

As PhillipCapital puts it, what was a 5-star fund yesterday is a 2-star fund today and a fund house that was not known yesterday, today is the best fund house. This makes the job of selection and constant monitoring an important job. Plus, tedious documentation and monthly tracking of each mutual fund scheme is something that investors want to avoid.

Merely having a few funds in a MF portfolio is not enough. The gap between best and worst fund is often quite big.

Take a look at how the best and worst funds performed. Look at what is the difference in wealth creation.

Phillip Capital PMS

Solution – The Phillip Star Portfolio will be a focused portfolio and contain 4-6 equity mutual fund schemes. This is a fairly good number in terms of diversification. While most funds would be invested in equity schemes, the uninvested amount will be parked in debt funds.

The fund manager of the PMS portfolio will do selection of the schemes. This will be based on a deep dive study of not only a fund’s past performance but also on their existing portfolio and various other parameters.

According to PhillipCapital, the philosophy is to stay invested for long-term but at the same time keep monitoring and if necessary rebalance as per changing market dynamics.

As a PMS investor, you will get regular portfolio updates through detailed monthly reports and annual CA certified statements of account.

So, what do you need to pay for all this? Performance based fees.

Cost to investor – The PMS offering will cost you. There is a performance based fee of 20% on gains above 36% (absolute returns) on completion of 3 years. From the 4th year onwards, the fee will be 20% of gains above 12% returns.

Exit within 36 months will attract exit load of 3%. There is no exit load after 36 months.

All other charges and statutory charges will be billed at actuals.

Fund Manager – Nishit Shah. He has more than 12 years of experience in Indian equity markets and investment products. He has been part of fund management team that have managed more than $ 100 million fund. Shah has worked at both buy and sell side.

Minimum Ticket Size for PMS – Rs 25 lakhs, either in the form of cheque, stocks, mutual fund units or in combination of any.

After you send the money, account activation should take 3-4 business days.

The MF units to be held in a DP account opened in your investor name.

RupeeIQ take – The product is ideal for investor who are averse to direct equity or invest heavily into mutual funds. Do remember this is a new product so we do not have data on how its actual performance is. The 20% performance based fee may seem high but investors should not worry as long as they are getting good absolute returns. You can argue that building a MF portfolio is easy, but that’s not true. It takes a lot of skill and research. Going merely by ratings (which rely on historical performance) does not help. So, if you have Rs 25 lakh and prefer investing in mutual funds, consider this PMS product. The alternative to this is to invest in mutual funds yourself with the help of an experienced wealth manager who can advise you on which funds to invest and rebalance your portfolio. This could come cheaper as you could invest through regular code (then advice comes free) or direct code with a fee paid to the wealth manager.

Disclaimer – Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on contact@rupeeiq.com