Portfolio Management Services (PMS)

Q1. Which statement best describes “Portfolio Management Service”?

1. Concentration risk is the danger of holding few stocks, so that one bad outcome can hurt the whole portfolio severely.
2. A custodian is an independent institution that safekeeps the client’s securities and settles trades, separate from the portfolio manager.
3. A PMS is a service where a SEBI-registered portfolio manager manages a client’s securities portfolio, usually for high-net-worth investors.
4. SEBI sets the minimum investment in a PMS at ₹50 lakh per client. Accredited investors can go lower.

Q2. Which statement best describes “Discretionary PMS”?

1. In a non-discretionary PMS, the manager recommends and the client must approve each transaction before it is executed.
2. A capital gains statement is a report from the PMS listing all sales and the gains or losses on them, used to file income tax returns.
3. A performance fee is a share of profits charged above an agreed return, aligning the manager’s earnings with the client’s gains.
4. In a discretionary PMS, the manager takes investment decisions on the client’s behalf without asking for approval of each trade.