Securities and Exchange Board of India executive director Manoj Kumar on Wednesday urged portfolio managers to actively participate in shaping the industry better and come up with proposals for the regulator to consider.
Speaking at a session organized by Association of Portfolio Managers of India (APMI), Kumar said there are various issues related to portfolio managers which are under the consideration of SEBI such as benchmarking. At present, there is a lack of clear benchmarks for asset classes such as debt and unlisted securities. Also, portfolio managers are free to specify their own benchmarks for the schemes instead of the standard set specified in the regulations. Portfolio Management Services (PMS) does not have a long standing industry body unlike Association of Mutual Funds in India (AMFI) which represents the mutual fund industry.
“You (APMI) have shown tremendous resilience over time. You have grown in numbers and investor interest and therefore it matters that you, as an industry body, shape the industry better. When you have any The larger the number of investors in the activity, the greater the responsibility. From that point of view, it is extremely important that you have collective knowledge. The core of the securities market is trust. Trust is especially important in some segments of the industry like yours which are less regulated. Unless you debate and deliberately frame more rules as an industry, you will invite unnecessary regulation,” Kumar said at the portfolio managers’ gathering.
Industry body APMI was incorporated in December 2021. It is led by Neeraj Choksi of NJ Group, Ashish Somaiya of White Oak Capital and Saurabh Mukherjee of Marcellus Investment Managers. It has actively started looking for members in the last one or two months. It currently has around 40 members out of 372 odd PMS managers registered in India. However, according to Rashim Bagga, Principal Officer, APMI, in terms of AUM, APMI members account for 84 per cent of the total industry.
The association has reduced the membership fee for the first year for portfolio managers with AUM less than 500 crores to Just 2,100 to 31 July 2022. There are about 200 portfolio managers who have According to Bagga, 500 crore AUM by March 2022.
According to industry sources, SEBI, in consultation with APMI, has constituted a working group on benchmarking for portfolio managers.
In response to SEBI’s focus areas, APMI is forming a committee to deliberate on valuation of securities as well. This is also an issue for debt and unlisted securities.
The AUM of portfolio managers has grown from less than 10,000 crore approximately from 10 years ago According to Saurabh Mukherjee, Founder, Marcellus Investment Managers, 2.8 lakh crores at present. The portfolio managers gathered in the meeting raised several issues with the regulator. These include difficulties in filing documents on SEBI website, high cost of custodian for securities and difficulty in converting them.
Working Group on Research Analysts
Responding to a question by Mint whether research analysts can offer model portfolios, a SEBI official present in the meeting said a separate working group within the regulator is looking into the matter.
In a recent settlement order in respect of Amit Jeswani, SEBI has said that Research Analysts cannot offer Managed/Model Portfolios but can only make buy/sell recommendations. This caused a lot of confusion among research analysts on fintech platforms that were offering such portfolios. An industry source who spoke to Mint on condition of anonymity said some research analysts have stopped weighting stocks and are only making buy-sell recommendations. He added that the fintech platform allocates equal weightage in such cases.