Sebi mulls standardisation for PMS schemes by setting up industry body

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Mumbai, Oct 23: The Securities and Exchange Board of India (Sebi) is deliberating on setting up an industry body to draw up best practices for portfolio managers and introducing a standard template to bring uniformity in the way they market their schemes. The discussions are preliminary.
At present, PMS providers file an offer document for filing with Sebi and release quarterly statements to existing clients mandatorily. However, there is no standardised document for marketing to potential customers and detail investment objectives, past performance and fund strategies. Performance could be depicted by weighted average returns, rolling returns or back-tested returns for newer schemes. Non-discretionary and advisory performance is often clubbed with the performance for discretionary portfolios, not reflecting true returns.
“The way the returns are communicated is mostly wrong. At the portfolio level, returns showcased are those of model portfolios which could be off the mark as investors enter the schemes at different points in time. The returns put up on the Sebi website are weighted average returns of each portfolio and give a misleading picture as well,” said a person who is part of the PMS industry.
PMS schemes typically mirror model portfolios although individual portfolios differ from investor to investor.
The performance of portfolio managers put up on its website is not approved or recommended by the regulator nor does it certify the accuracy or adequacy of the monthly report, the Sebi website says. The regulator further cautions that since no pooling is allowed or units issued as in the case of MFs, the performance of one portfolio manager may not be comparable with the performance of another. The monthly reporting is as per a regulatory circular dated October 8, 2010.
“Sebi is doing its bit to ensure the PMS providers adhere to data sanctity. However, unlike mutual funds, the marketing material for PMS schemes is not in a standard format and most providers use ad hoc data for representational purposes,” said a second person, requesting anonymity.
Mutual funds, on the other hand, detail scheme returns and features by way of an offer document consisting of scheme information document (SID) and statement of additional information.