Structured products are the way forward for PMS

Structured products are going to be the future so far as portfolio management schemes (PMS) are concerned. Almost all financial services companies offering PMS are seriously contemplating offering these niche products to their customers.

Rakesh Parekh, vice-president, portfolio management services at J M Morgan Stanley, said, "Structured products will be how this segment is going to move forward."

Structured products mean a combination of commodities futures, equity derivatives, options with their various permutations and combinations. At present, PMS largely involves investing in equities and sometimes mutual funds as well.

Sanjay Prakash, chief executive of HSBC Mutual Fund, also agrees that structured products will be the next big thing, but according to him, it will have to be a very specialised product requiring niche expertise.

"There is very little skill in this particular segment available, so we will have to recruit some specialists for this," he said.

There is also little understanding at the client level too, so such products will have to be explained to the customers as well before such structured products can be launched.

PMS is still a relatively nascent segment in the Indian financial services market as it gained currency only over the last couple of years, when a whole host of brokerages and asset management companies included PMS among the services offered by them.

Parekh said that with the rise of disposable incomes, customers are also becoming aware of the need to have someone with the necessary expertise looking after their investments.

"Some of these people have no knowledge of investments, so they come to us. Some of them have the knowledge, but have no time for devoting on it," he said.

The profile of the customers opting for PMS includes promoters of small and medium scale industries, treasury departments of corporates, high net worth individuals and self-made businessmen.

Some of those opting for such schemes also seek personalised conference calls which such companies are willing to offer.

J M Morgan Stanley has launched a couple of schemes recently - the Core scheme for long-term investors, and Voyager scheme for short-term investors, looking for higher returns.