Questions you should ask your PMS Manager

Portfolio management services (PMS) can be a great way for investors to delegate their investment decisions to a professional. However, with so many PMS providers out there, it can be difficult to know which one is right for you.

One way to make an informed decision is to ask the PMS manager a few key questions. Here are some of the most important questions to ask, along with some additional questions that were suggested:

• What is your investment philosophy? What are your investment goals? What kind of risk are you comfortable with?
• What is your track record? How has your portfolio performed over different market cycles?
• What are your fees? How much do you charge for your services?
• What is your process for managing my portfolio? How often will you review my portfolio? How will you make investment decisions?
• What are your conflicts of interest? Do you have any personal investments that could conflict with my interests?
• Do you have a high-water mark? If not, why not?
• What is the minimum investment at which point you become as low in cost as a mutual fund?
• How are you different from any long only mutual fund?
• Why are you so much more expensive compared to an equity mutual fund?Do you have demonstrable alpha over 10 years?

In addition to these questions, you may also want to ask about the PMS provider's experience, qualifications, and regulatory compliance.

It is important to remember that PMS services are not for everyone. They can be expensive, and they may not be suitable for investors who are not comfortable delegating their investment decisions. However, for investors who are looking for a professional to manage their portfolio, PMS services can be a valuable option.

High-Water Mark

A high-water mark is a concept in PMS that refers to the highest value that a client's portfolio has ever reached. If a PMS manager loses money for a client, they cannot charge the client performance fees until the portfolio has recovered to its high-water mark. This helps to protect clients from paying for losses that are not their fault.

Cost

PMS services can be much more expensive than mutual funds. This is because PMS managers typically charge a management fee and a performance fee. The management fee is a fixed fee that is charged regardless of the performance of the portfolio. The performance fee is a percentage of the portfolio's profits that is only charged if the portfolio performs well.

The cost of a PMS service can vary depending on the provider and the size of the portfolio. However, it is not uncommon for PMS fees to be 2% or more of the portfolio's value.

Differences Between PMS and Mutual Funds

There are several key differences between PMS and mutual funds. First, PMS services are typically offered to high-net-worth individuals, while mutual funds are available to anyone. Second, PMS managers have more discretion over how they invest a client's money, while mutual funds are managed by a team of professionals who follow a set investment strategy. Third, PMS services are typically more expensive than mutual funds.

Conclusion

PMS services can be a good option for investors who are looking for a professional to manage their portfolio. However, it is important to do your research and ask the right questions before you sign up for a PMS service. By asking the right questions, you can make sure that you are getting the best possible service for your money.