Portfolio plans back in vogue

Budget bonanza for super rich

Portfolio management schemes (PMS) are generating a lot of interest among high networth individuals (HNIs) as tax breaks announced in the Union Budget have made direct investments in equity attractive. PMS providers are, however, planning to hike their threshold limits given the servicing constraints.

Ravi Sharma, head of marketing, Birla Sun Life Mutual Fund, said that their recently launched PMS was generating a lot of interest and "we have been receiving a lot of enquiries of late."

To translate into actual investments, however, a lot would depend on the direction of the equity markets.

The Budget has abolished long term capital gains tax and introduced a flat 10 per cent short term capital gains tax. These reliefs are, however, not available for investments in mutual funds.

Ashish Ranade, fund manager for Axel, the portfolio management service launched by UTI Mutual Fund said, "There definitely has been an interest which shows that HNIs, who previously invested with the mutual fund, are tending towards PMS." He pointed out that this did not mean that all HNIs who migrated to PMS would be accepted.

"There is a limit to how many people can be serviced. We can, for instance, accept a maximum of around 400 to 500 and after that we will have to refuse applications." He said AMCs will tackle this by raising the threshold limit so that the cut-off amount for accepting clients is raised.

While no one has actually done this as yet, some AMCs hare learnt to be toying with the idea since there has been a flood of applications from such potential customers.

HNIs typically do not put all their eggs in one basket and have their investments split into PMS and mutual fund units. Tax planning plays an important part in investment objectives as also maximisation of returns.

Prakash Dalal, chief marketing officer of Kotak Mutual Fund, said some of their MF clients were evaluating prospects of a shift to PMS, which is a division under Kotak Securities and is handled by a different setup.

He agreed that the capital gains tax relief for direct investments in equity would have an impact on high value investments from individuals, but said that it would be marginal.