Khyati Dharamsi 

Mumbai: The mushrooming of portfolio managers has caught the attention of regulator Securities and Exchange Board of India (Sebi).

At its board meeting on Tuesday, Sebi asked PMS houses not to pool assets of investors the way mutual funds do and also increased the minimum networth requirement for floating a PMS house.

“Portfolio managers will not be permitted to float a scheme or pool the resources of the clients. They would be required to keep the assets of each client separately and not in a pooled manner,” Sebi said.

Pooling of assets had been the easier way for PMS houses to invest as it helps in bulk buying and selling.

Arjun Parthasarthy, head of PMS at Sundaram BNP Paribas Asset Management said, “Operationally, pooling of assets is easier for PMS houses while buying and selling securities. It will definitely increase costs.”

“The decision of non-pooling of assets would lead to an execution hassle. The weighted average cost in terms of allocation would differ from client to client,” said a PMS head, requesting anonymity.

He pointed out, though, that “the wholesale brokerage costs would still be available.”

Industry sources said it was quite possible to maintain different client accounts separately.

The networth required to float a PMS scheme has been increased to Rs 2 crore from Rs 50 lakh earlier, purportedly to weed out the smaller players.

Experts, though, feel Rs 2 crore is not too high an amount.

Dhiraj Sachdev, head of equities at HSBC PMS, said, “PMSs floated by larger asset management companies and brokerage houses wouldn’t be affected by the networth criteria as they are well-capitalised. The move could keep out competition from smaller players or individuals running PMS.”

The number of PMS players has shot up to 205 as on March 31, 2008, from just 18 in 1999. These include several small and mid-size brokerage firms. This is unlike in the markets abroad, where PMS is run primarily by asset management companies.

Some of these players run one-man armies, too.

A major reason for the increase in the number of players is that there are fewer requirements for running a PMS than for a mutual fund.

Source : DNAIndia