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Services (PMS) Reporting - Review

Benefit From Gray Arrow A Kaytek Investment Consulting Service

Down Arrow Overall Observations on the Reporting of a PMS - Portfolio Management Services (offered by a Mumbai based stock broking company) are provided below :

Gray Arrow 1.0 - Comparison Of Returns - The very high value of returns delivered during the period 10th March 2005 to 30th June 2005 is not accurately reflective of the actual historical trend in the markets so far and may not be also predictive of the future. This must be clearly indicated in the PMS report. Also, if possible, similar to the comparison done by mutual funds against various benchmark indices, the PMS scheme's returns must also be compared to various benchmark indices such as the BSE & NSE returns during the same period.

Gray Arrow 2.0 - Possible Conflict Of Interest - There could be a possible conflict of interest in the Portfolio Manager charging both PM Services-based fees ( Asset Management Fee and Annual Performance Fee) and transaction based fees ( Brokerage). Perhaps, Only one should be charged, or the brokerage fees must be clubbed with the PM Services-based Fees.

Gray Arrow 3.0 - Performance Penalties - There should also be a provision for Performance penalties in cases the Portfolio Manager fails to deliver of pre-agreed performance milestones (like providing atleast the Risk-Free Annual Return of Post Office of say 8% pa.)

Gray Arrow 4.0 - Maximum Cap On Expenses There should be a maximum cap on the percentage level of expenses outlined in the best interests of the investor and the same should be mentioned in the agreement. It cannot be left open ended to the discretion of the Portfolio Manager.

Again, using mutual funds as an analogy, just as there is a maximum cap set by the regulatory authorities on the fund expenses as a percentage, thee must be a similar upper limit on PMS expenses also.

Gray Arrow Next - 5.0 - Thoughts on the Portfolio Summary Report.

This is not Investment advice. Please consult your Stock Broker for the same.

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Updated on 18th January 2010.
Created on 30th August 2005.

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