PMS Review: Centrum Broking

We take you through the PMS products offered by Centrum Broking, a mid-sized PMS provider with a roughly Rs 644 crore AUM.

A PMS or portfolio management service 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.

You pay tax on PMS gains as and when they are realized by the manager, even if you have not withdrawn money from the PMS. This is different from mutual funds where gains are taxable only if you redeem your funds.

A PMS can be discretionary or non-discretionary. The latter requires your specific approval for each portfolio transaction while the former does not.

Centrum PMS

Centrum Broking was incorporated in 1994 and became a subsidiary of Centrum Capital in 2011-12. It caters to HNIs, NRIs, Corporates, Banks and mutual funds. Its major PMS offerings are as follows:

  1. Centrum Growth: Focuses on large-cap stocks and in a concentrated way (about 20 stocks). It has the Nifty 50 as a benchmark
  2. Centrum Wealth Creator: Large and mid-cap stocks with large caps to provide liquidity and midcaps for value creation. It has the BSE 500 as its benchmark.
  3. Centrum Deep Value ‘Multi-bagger’ portfolio I, II, IV and V: Deep value stocks including those of relatively unknown mid and small-cap companies. It has the BSE 500 as its benchmark.
  4. Centrum String of Pearls DV – III: Deep Value stocks including under-researched small and midcap stocks. It aims for a concentrated portfolio of about 15 stocks.
  5. Aligned Ownership Strategy: To invest in companies where the promoter/management stake is increasing. It has the BSE 500 as its benchmark.
  6. Centrum Microcap Portfolio: Investing in micro-caps or stocks below Rs 2500 crore in market capitalisation
  7. Centrum Pharma and Healthcare Strategy: Invests in companies in the pharma and healthcare space. Its benchmark is the Nifty Pharma Index.
  8. Centrum Hedged Portfolio Strategy: Invests in companies in the BSE 500 and uses derivatives to contain downside risks. Its benchmark is the Nifty 50.
  9. Centrum Modified India Portfolio: Participating in the equity markets along with downside protection

The minimum investment amount for its PMS products is 25 lakhs. As of September 30th, 2017, Centrum had 720 clients and an AUM of Rs 644 crore. Its performance across key PMS products was as follows:

Portfolio Name & Benchmark FY 16-17 (%) FY 15-16 (%) FY 14-15 (%) FY 13-14 (%) CAGR
Growth 19.28 -10.22 44.54 -0.94 11.3
Nifty 50 20.92 -7.13 25.11 18.96 13.7
Wealth Creator 19.99 -8.37 87.35 8.91 22.4
BSE 500 24.09 -7.52 31.72 15.56 15.0
Multibagger II 21.79 -6.34 11.91 8.5
BSE 500 23.86 -7.33 6.88 7.1
String of Pearls DV III 26.02 6.94 -2.86 9.4
BSE 500 23.26 -8.25 -5.29 2.3
Microcap 11.92 11.92
BSE Small Cap 20.75 20.75
Pharma and Healthcare 2.06 2.06
Nifty Pharma -9.04 -9.04

Source: PMS Disclosure Document dated 23rd October 2017

RupeeIQ Take

Centrum has a mixed record of outperformance and underperformance. The return figures vary dramatically, depending on the product chosen.

In our view, a small number of strategies with a good track record and transparent disclosures are important ingredients of PMS manager selection. Centrum has a large number of strategies which add to the complexity. We were also unable to locate any disclosure of PMS fees.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.