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At the Cafemutual CafeAlt Conference 2024, Saurabh Mittal, Founder Director of Circle Wealth Advisors shared with us opportunities for MFDs in PMS distribution.
Saurabh has built substantial AUM in PMS and Cat III AIFs. He is a CFA charterholder and CFP with over two decades of experience.
Saurabh said that PMS offers better flexibility in terms of fee structures compared to mutual funds. While mutual funds charge TER on AUM irrespective of scheme’s performance, PMS offers some innovative fee models. For instance, many PMSs charge zero fixed fees. They only charge a fee when a fund delivers a certain return or hurdle rate (generally the benchmark returns).
Another key benefit of PMS is exposure to a concentrated portfolio. While mutual funds, even in their focused categories, usually hold around 30 stocks, PMS portfolios typically consist of 12 to 20 stocks, allowing for a more targeted strategy, Saurabh added.
Saurabh also pointed out that PMS is a non-pooled investment vehicle which does not affect investors during heightened volatility and redemption pressure.
Talking about the taxation, Saurabh said that while PMS have some tax disadvantages, the non-pooled structure, exposure to concentrated portfolio and innovative fees made it a better choice over other investment vehicles.
Sharing with the audience how he shortlists PMS for his clients, Saurabh said that he focuses on qualitative factors like the experience of the team, research capability and accessibility and transparency of fund manager.
The MFD also believes in skin in the game concept. He is more comfortable recommending PMS of companies where the fund manager is the promoter and has adequate investments in his own scheme.
To conclude, Saurabh said that PMS provides diversification to wealthy clients and its non-pooling structure safeguards them from losses, particularly during market dislocation.
You can watch the complete session by visiting this YouTube link https://www.youtube.com/watch?v=Be4v7Oo2G7E
