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There is no easy way to say this.

The Portfolio Management Services Industry is in a shambles.

No. It's broken. 

It's a tale of "naam badey, aur darshan chhotey". 

The Industry was born on the promise of superior performance. Superior to Mutual Funds, that is. 

But what does the data say?

The industry performance has been abysmal, to say the least. 

We have given a table later in this piece, that shows you in crystal clear light, how poorly the industry has performed.

(And don't miss our Conclusion, at the end)

Whether you take 3 months, Year to Date, 1 year, and 3 years.

The Returns (if one can even call them that) have been disgraceful. 

All are DOWN for 3 months, YTD and 1 year. Only a couple are marginally positive even on a 3 year basis.

Before we delve into the Performance data of the PMS majors, it's instructive to see what explains this terrible set of Performance Numbers.

Our Analysis shows:

1.      Extremely poor/ non existent Risk Management: 

Nobody seemed to have heard of any concept called stop losses. It's just "It's a great story at Rs.4000. It's very attractive at Rs. 3000. It's a no-brainer at Rs. 2000".

Dude, you (or rather your clients) are down 50% and you are calling it a no-brainer?

2.      Overly concentrated exposures in a handful of stocks: 

Many, if not all, had exposures to a handful of stocks. Usually Financials and/or FMCGs. Both sectors have been hit at different points this year. 

Concentrated Portfolios may be a reasonable way to manage personal money. But absolutely no way to manage Other People's Money.

In fact, it's downright irresponsible fund management. Nothing less.

3.      Very poor analysis of the Business environment: 

How could anybody sensible be having 40-60% in Financials, in February when it had become completely clear that the Indian economy was going to get into some degree of stress. 

Even a B.Com student knows that in any economic stress, banks take the biggest beating. Always.

4.      An irrational, child-like "storification" of investing:  

"Asian Paints can grow perennially, irrespective of the economic environment"; "Kotak Bank will continue growing irrespective of industry stress" "This Business has moats", blah blah. 

As if valuations don't matter.

Investing, unfortunately, is all about data. Not fairy tales. 

One can't manage external money based on stories and tales. 

Let's leave something for kids.

Broad Analysis of PMS Performance of major PMS companies

Last 3 Months' Performance Data

• The 3M returns of almost all PMS schemes are massively negative in the -10% to -30% range (only First Global's IS50 was up +6.9% and IMAAP was up +6.0% in the same period). Markets were down 19% on a 3M basis.

For example:

-          ASK schemes are down 15-19% in the past 3 months

-          Motilal Oswal schemes are down 12-30% in the past 3 months

-          Alchemy schemes are down 20-27% in the past 3 months

-          Marcellus Schemes are down 10% in the 3 months

-          Ambit schemes are down 10-20% in the past 3 months

YTD Performance Data

• The YTD return of almost all schemes is negative in the -5% to -25% range (First Global's portfolios were UP +9.3 to +15%). The markets were down 18.5% on a YTD basis.

For example:

-          ASK schemes are down 15-16% on a YTD basis

-          Motilal Oswal schemes are down 18-22% on a YTD basis 

-          Alchemy schemes are down 15-26% on a YTD basis

-          Marcellus Consistent Compounders scheme is down 5% on a YTD basis

-          Ambit schemes are down 6-13% on a YTD basis

1-Year Performance Data

• The 1-year returns of most of them are negative in the -1% to -28% (First Global IS50 is up +12.5% and IMAAP is up +20%). 

For example:

-          ASK schemes are down 4-9% on 1-year basis

-          Motilal Oswal schemes are down 7-28% on 1-year basis

-          Alchemy schemes are down 22-26% on 1-year basis

-          Aditya Birla schemes are down 1-19% on 1-year basis

-          Ambit schemes are down 1-14% on 1-year basis

3-Year Performance Comparison

• The 3-year CAGR returns of most schemes are negative in the -2% to -14% range, while for some it is in the low 2-3% range compared to the NSE 500 Index CAGR return of 0.4%. 

For example:

-          ASK schemes are up just +2-3% on a 3-year CAGR basis 

-          Motilal Oswal schemes are down 3-14% on a 3-year CAGR basis

-          Alchemy schemes are down 3-6% on a 3-year CAGR basis

-          Aditya Birla schemes are down 3-9% on a 3-year CAGR basis

5-Year Performance Comparison

• The 5-year CAGR returns of the ones that have reported their performance are very low.

For example:

-          The CAGR returns of ASK schemes are in the 7-9% range on 5-year basis

-          The CAGR returns of Motilal Oswal schemes are in the 1-6% on 5-year basis 

-          The CAGR returns of Alchemy schemes are in the 3-5% on 5-year basis

-          The CAGR returns of Aditya Birla Schemes are in the 2-3% on a 5-year basis

What's wrong with the lowly Fixed Deposit if this is what you are going to get?

Source: PMS Bazaar, PMS AIF World, SEBI

Conclusions:

The above is nothing but data talking. 

And what it's saying is that all PMS managers have demonstrated zero ability to deliver reasonable returns or manage risk.

They have simply spun a series of nice stories with zero backing of data, rational thought or even basic commonsense. 

Does this sound harsh?

Sure, it does.

But the Performance Data is harsher. 

Isn't it?

In this game, you can't fail at both and call yourself a Fund Manager. 

From the desk of 

Shankar Sharma & Devina Mehra

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 8850169753

Chat soon!

https://firstglobalsec.com