PMS Review: Geojit Financial Services, subdued but steady Geojit Financial Services has a long-standing presence in the broking and financial services space. It has a relatively simple and easy-to-understand PMS offering. However, on the flipside, the returns on its two PMS have been lacklustre with a CAGR of 8-10%.

What is a PMS?

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You pay tax on PMS gains as and when they are realized by the manager, even if you have not withdrawn money from the PMS.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. Both of Geojit’s PMS products are discretionary in nature.

Background

Geojit Financial Services was established by C.J. George and Ranjit Kanjilal in 1987 as a partnership firm. It became a public limited company in 1994 and listed on the Bombay Stock Exchange (BSE) in 2000. The French multinational bank BNP Paribas took a stake in the company in 2007 and the company’s name was changed to Geojit BNP Paribas. In 2017, BNP Paribas withdrew from managerial involvement in the company while still retaining a financial stake. As a result, the company’s name was changed back to Geojit Financial Services. The Kerala state government also has a stake in the company and appoints a nominee to its board. Geojit distributes mutual funds, insurance and third-party deposits and offers broking services apart from its PMS service.

PMS Services Offered

Geojit offers two PMS products. The first is the ‘Advantage Portfolio’ focused on mid and small cap stocks and the second is the ‘Freedom Portfolio’ focused on large, mid and small-cap stocks. Both have a minimum ticket size of Rs 25 lakh and are offered to resident individuals as well as NRIs.

As the table below shows the Advantage Portfolio has generated a CAGR of 10.1% over the past three years, lower than its chosen benchmark. The Freedom Portfolio has generated a CAGR of 8%, slightly higher than its chosen benchmark. The figures have been computed from the filing made by Geojit with SEBI on 20th April 2018. Geojit managed Rs 150.45 crores as on 31st March 2018 in its PMS products and had 519 clients.

Weighted Avg return (%) 2015-16 2016-17 2017-18 CAGR (%)
Advantage Portfolio 0.03 21.32 9.85 10.1
Nifty Midcap 100 -3.23 34.62 9.08 12.4
Freedom Portfolio -11.03 19.82 18.31 8
Nifty 500 -8.11 23.43 10.67 7.9

PMS Fees

Geojit has two options for PMS fees. First is a flat 3% fee on the PMS value. Second is a fee of 1% on the PMS value and a performance fee of 20% of the gain of the PMS over and above 12%. It also levies an exit load of 1% on exits within one year of account opening.

RupeeIQ Take:

Geojit does not confuse investors with dozens of different portfolio styles and fee structures. It keeps things simple and easy-to-understand. On the other hand, as mentioned above, performance has been subdued over the past three years. A lot depends on performance over the next couple of years.

Author
Neil Borate

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