PMS asset growth outpaced client additions in 2019, shows Sebi data

The portfolio management industry added assets faster than it added clients, suggesting a shift in anticipation of regulatory changes made during the year.

The total assets under management for portfolio management services (PMS) is up 16 per cent (to Rs 17.7 trillion) so far in 2019, more than double the 7 per cent growth seen in the previous year.  

The total number of clients has, however, risen at a slower pace.  It is up 12 per cent, from 140,000 to 160,000, shows the regulatory data.  

Interestingly, the addition in clients is also slower than the 32 per cent increase seen in the previous year. This comes amid a regulatory push to increase the minimum investment size in such products. Adding more assets than clients would mean the average investment by a client would be on the rise.

The data for such service providers is released with a lag.  The current analysis is based on November-end data available on the regulatory website.

The Securities and Exchange Board of India had put out a consultation paper in July, which suggested increasing the minimum investment amount from Rs 25 lakh to Rs 50 lakh. This would mean that the number of eligible investors may shrink, though the absolute amount from each investor would increase.  

“The working group has proposed a minimum investment amount of Rs 50 lakh, so that small savers can be prevented from taking exposure in PMS that technically carry higher risks, such as concentration risk, illiquidity, wide investment mandate, etc,” the paper had said.

It was accepted in a board meeting in November. The industry may well have acted in anticipation.  However, the changes are likely to see some effect on how the industry position is able to garner new business, said Ajay Bodke, chief executive officer (CEO) of PMS at domestic financial services firm Prabhudas Lilladher.

The regulator also put in place norms for higher net worth for PMS players. It was increased from Rs 2 crore to Rs 5 crore.

“Higher net worth requirements are less likely to affect established players, though many smaller ones would likely have to find a way to meet the new norms,” said Vikaas M Sachdeva, CEO at Mumbai-based Emkay Investment Managers. “Most boutique players may see some consolidation,” said Sachdeva.

The industry remains at a nascent stage, compared to the Rs 27-trillion in assets managed by mutual funds. Most of the assets are driven by retirement products. Around 73.6 per cent are from the Employees’ Provident Fund Organisation and other such funds, shows the regulatory data.