Our Cover Story on Moneylife's virtual war with the regulator to get performance data on portfolio management services (Moneylife, 22 August 2013) into the public domain raised one persistent query: 'Tell us who performed'; or 'Did any PMS scheme perform at all?'
There are several issues with putting out this information, the main one being that the Securities & Exchange Board of India (SEBI) has simply not helped us get proper, comparable data over a reasonable period, which an investor needs to make an informed choice about who to trust with Rs25 lakh or more. Since our enormous effort was aimed at bringing you information about what works, we are going ahead and giving you the information, with a set of caveats that we urge you to read carefully. We start with two, but there are more later. First, this information pertains to three-year performance only, because that is the extent of disclosure that we managed to nudge the regulator to mandate. Secondly, we assume that it covers all the performers, because it is unlikely that PMS schemes that have done well would have refused to part with information. With these factors in mind, here are the performers:
Only 16 out of 121 schemes have outperformed their benchmark over a three-year period while 20 schemes failed to outperform in all three years.
The Best: Only two PMS companies (not schemes) have outperformed their benchmarks in all the three periods for which we have data. These are: Quantum Advisors (AUM Rs3,845 crore) and Parag Parikh Financial Advisory Services (AUM Rs254 crore). However, both have just one scheme in operation. Quantum is run by Ajit Dayal and PPFAS is run by Parag Parikh and both are thoughtful and experienced investors with an excellent reputation. A PMS company may have multiple schemes for marketing purposes. Ideally, if an investor wants to make a confident choice, then all, or at least a majority, PMS schemes of any fund house ought to outperform at least its own benchmarks.
Good Performers: The next category includes UTI Asset Management (AUM Rs118 crore). It has four schemes, of which two Portfolio of Funds scheme and Aggressive Strategy scheme did well in all the three one-year periods. The other two schemes did well in two of the three one-year periods.
ICICI Prudential Asset Management (AUM Rs548 crore) has 12 schemes; of which six Bluechip Portfolio, Build India Portfolio, Deep Value Nucleus Portfolio, Deep Value Portfolio, Infrastructure Portfolio and Targeted Return Portfolio outperformed their respective benchmarks in all three one-year periods. Avendus Wealth Management and PN Vijay Financial Services, have one scheme each which did well over two one-year periods. And, unlike mutual funds, there is less information (only three years) in the public domain about how these are managed. The investor cannot choose a company offering PMS, because she can land up with the wrong choice.
Average Performers: Motilal Oswal Asset Management (AUM Rs996 crore) has 12 schemes of which only three have beaten their benchmark in all three one-year periods. How would you as an investor know which three to choose? IIFL Wealth Management (AUM Rs98 crore) has three schemes, of which one, the NRI Portfolio, has beaten the benchmark in all the three years and the other two have beaten their benchmark in two of the three one-year periods.
The Bad Performers: There is a long list of bad performers. But let's start with the worst. Geojit BNP Paribas Financial Services (AUM Rs60 crore) and Prabhudas Lilladher (AUM Rs27 crore) each has a single scheme which has not beaten its respective benchmark in any timeframe.
Equally pathetic are schemes of Reliance Asset Management (AUM Rs328 crore) and Religare Asset Management (AUM Rs30 crore). Reliance has 16 schemes the largest number in our sample. Despite its size and expertise, just one scheme has outperformed the benchmark in all the three one year periods and only two have outperformed over two one-year periods. The one scheme that did well over three years happens to be a debt fund All Season Debt Shield. In fact, a majority of Reliance's schemes (13) did well only for a single year period. Religare has 13 schemes of which just one has beaten the benchmark.
Among the other PMS companies whose schemes underperformed are: BNP Paribas Investments Services, ING Investment Management, Emkay Investment Managers, SBI Funds Management, Way2wealth Brokers, HSBC Asset Management India and Sharekhan.
As we mentioned in our Cover Story on PMS, it is hard to pick a scheme that will do well always. A majority, over 86%, has not performed consistently over the long term (i.e., in all three years). Unfortunately, three years is the maximum timeframe for which data is available to the public for making informed choices, unlike mutual funds for which returns can be compared since inception of a scheme. Unless SEBI mandates PMS companies to disclose performance data from the very beginning of their operations and place it in the public domain, the investing public will remain in the dark, even in an era when the regulator has made full disclosure the cornerstone of its regulatory philosophy.
Readers may recollect that our Cover Story was probably the first publicly-available study of its kind in the country, we have analysed the schemes of portfolio management services (PMS) companies that have either put out their three-year performance data in the public domain or have shared the data with us. These add up to 121 schemes from 26 portfolio management companies. There is a total of 46 PMS companies with discretionary portfolio and assets under management (AUMs) of more than Rs10 crore from a total of 253 PMS companies. Three PMS companies were launched recently and, therefore, did not have historic data, while 17 have not uploaded their performance data and refused to share their data with us. We would have liked to report their performance too but these companies have chosen to hide their performance, for whatever reasons.
So, what are our conclusions? At the very outset, we would say: Avoid the PMS companies that hide their data from the public. Even if you get access to their performance by posing as a prospective client, you would be looking at it on an isolated basis. You don't know where they stand in a ranking. What about the performance of those who have shared the data with us?
Highly qualified portfolio managers use elaborate strategies, often through several schemes, to create 'alpha' or 'market outperformance'. But are they really beating the market benchmarks? You will be surprised with our findings which took us several months to compile.
* The 26 PMS companies have a total of 121 schemes between them; just 16 schemes outperformed their respective benchmarks over a three-year period. Startling as this is, it gets worse.
* As many as 20 schemes did not outperform their benchmark ever, in any of the threeyear periods!
* A total 28% of the schemes outperformed their respective benchmarks in two out of the three one-year periods.
* A total 42% of the schemes did well in just one out of the three one-year periods.The quality of disclosure of PMS companies is shoddy. We found that some PMS companies had not updated their performance data since March 2011, at least in the public domain.
This makes it nearly impossible to compare PMS performance, since figures of different PMS companies and schemes are from different dates and for different periods. For example, Tata Asset Management, Sharekhan and Way2Wealth have disclosed data only up to March 2011. IIFL Wealth Management had figures disclosed only up to March 2012. Angel Broking, Religare Asset Management and Prabhudas Lilladher disclosed data only up to September 2012. A few such as Parag Parikh Financial Advisors, Quantum Advisors and Motilal Oswal Asset Management have disclosed their documents up to March 2013.
Therefore, if you had to take the performance data of Angel Broking, IIFL Wealth Management, Sharekhan and Quantum Advisors and compare, the performance will be incomparable, to say the least. Simply put, although some PMS companies have put up their disclosure document, they have not updated it. This leaves retail investors shooting in the dark. Unfortunately, market watchdog, SEBI, is least bothered. So much for its disclosure-based regime or interest in creating informed and empowered investors!
The original article could be seen here.