r2i forum

Beware: Long post ahead.

I have lately decided to invest via PMS route in India since PFIC laws makes it difficult for one to invest in India via Mutual funds. The first trustworthy name among big brokerage houses came to my mind was Motilal Oswal. I knew that they provided PMS for quite some time. I was trying to judge the quality of their offering and worthiness in general. First stop: Their web site. Most of the generic information including fee structure but surprisingly they do not disclose their past performance numbers on the web site. One of the most important thing I wanted to find out was their philosophy and more importantly practice of Value investing. Next stop: Google for user experiences with objective comments. I uncover at least one blog that had objective analysis that read between the line from what was written at Motilal Oswal's web site.Among Other things the blog had an e-mail address of the Assistant VP of PMS department. So naturally, I decided to get information from the source. Bellow is my e-mail conversation with Chetan Patel (Unedited with personal information masked for privacy)

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Roger Thu, May 17, 2007 at 4:45 PM
To: [email][email protected][/email]
Chetan,

I received your e-mail address from this blog comments:
http://www.galatime.com/2006/03/12/portfolio-management-services-motilal-oswal/

I was also concerned after not finding any performance related information on Motilal Oswal PMS web site. Why would you not disclose performance information to potential investor especially investors with lot of money at stake?

Being said that I respect the business practices of Motilal Oswal and firm's principles of value investing. But the performance is the only way for me to see that firm actually practice those principles. I am a big believer of efficient markets but I also know that Indian market is not yet efficient so research firms who practice value investing principles can still beat the market for forcible future.

Now this brings me my actual question: I am interested in investing in Value Hedge PMS. Please address following concerns:
* What were the past performance numbers? Does performance numbers are after trading fees and trading taxes?
* How is performance based fee charged? i.e. on performance after trading costs and taxes or before tax/fees?
* If performance based fees are charged before trading cost and taxes then how much percentage of portfolio are spent on trading costs and taxes?
* What is annual portfolio turn over?
* Portfolio manager, Jigar Shah, has only 5 years of experience. All of his experience was during bull run. Does this concern investors? I am clearly concerned.
* Is the portfolio maintained under investor's name? i.e. stocks/bonds/derivatives are bought under investors name?
* What kind of instrument this PMS uses for hedging?

Please take your time and answer my questions. I would also appreciate any literature/information you can forward me in addition to my concerns.

Thank you for your time,
Roger


[email][email protected][/email] Thu, May 17, 2007 at 10:53 PM
To: Roger
Dear Mr. Roger,

Thank you for your interest in us.

Some of the queries are clasified and i may not able to give details on
email.

Kindly let me know your convinence time and contact no. so that I can
clarify all your queries.

Regards,

Chetan Patel
[Quoted text hidden]
Rogerl Mon, May 21, 2007 at 2:46 PM
To: "[email protected]" Chetan,

Please call me at +1-xxx-xxx-xxxx anytime during Indian business hours.

Thanks,
Roger
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First thing that struck me was the use of word "classified" in the reply. How can you claim my requested information as a classified information? I mean, it is firms moral obligation to potential customer with 25+ Lakhs to invest!! I am not sure what are SEBI guidelines for information disclosure for PMS discretionary schemes. Being said that I had given benefit of doubt to Chetal Patel so that he can make his best case by giving him my cell phone number. I have not received any phone call till date.

My experience could be just one isolated case of bad customer service or on the flip side: Firm may be "selling" PMS using sales tactics that you can easily perform over phone. And every one knows why you need to "sell" something over phone conversation or by face-to-face conversation.

I open the floor for comments/questions/suggestions.

If you are interested in going for PMS with Motilal Oswal the best one out there is Value PMS managed by Ramdeo Agarwal himself. The philosopphy is min churn and they just sit on about 5-10 stocks in your portfolio for long term. I have the numbers of most of their PMS. There 5 lac PMS sucks.
Hope it helps.
cjappu

cjappu;26971If you are interested in going for PMS with Motilal Oswal the best one out there is Value PMS managed by Ramdeo Agarwal himself. The philosopphy is min churn and they just sit on about 5-10 stocks in your portfolio for long term. I have the numbers of most of their PMS. There 5 lac PMS sucks.
Hope it helps.
cjappu

Can you post the past performance numbers for their various PMS schemes here for other members' benefit?

Thanks

#1
Kindly note that PMS in India does not fall under any SEBI regulation and performance disclosure is not mandatory.

If you feel you are not comfortable investing via Motilal Oswal , why don't u contact ICICI Prudential, Reliance Capital, ASK Raymond James, Franklin Templeton etc as all of them provide PMS offerings and would certainly be more open in their dealings as compared to Motilal Oswal.

I know for sure that ICICI Prudential provides a detailed report of their past performance in various PMS offerings.

I have a presentation from Kotak on this from last year. I will search for it and post tomorrow.

kdc_blue;27123#1
Kindly note that PMS in India does not fall under any SEBI regulation and performance disclosure is not mandatory.

I beg to differ but PMS is registered financial entity with SEBI. SEBI has a well defined regulations for PMS managers.
http://www.sebi.gov.in/acts/act2004122.html
Chapter III defines responsibilities in detail.

Being said that, regulations does not define how PMS manager should deal with "potential clients".

PS: To comment on my own statement in #1: There are two type of PMS as defined by SEBI.
1. Discretionary: PMS manager defines investment strategy and is in full control of changing the same as he sees fit for client's best interest. Most PMS today fall under this category.
2. Non-discretionary: Client directs the investment strategy.

Desi;27137I have a presentation from Kotak on this from last year. I will search for it and post tomorrow.

Thanks Desi, Look forward to Kotak PMS presentation.

On a similar note: I have done some research on PPFAS PMS. Among other things they have lot of information about their PMS disclosed on their web site. This PMS discloses most amount of information on their web site among all the other PMS I have looked so far.

Random thoughts: It seems like most PMS in India wants to chase after HNI without justifiable "extra returns" above and beyond what lot of good Mutual Funds already provides. More over, good mutual funds have a consistent track record of providing higher return as compared to major indices whereas PMSs have relatively shorter history. I personally believe that PMS are doing good in India just because HNIs wants to be treated as VIP. So PMS is more of a lifestyle product than a fianancial product in India!! Any takers?

I am not sure if PMS escapes PFIC. Experts: What is your opinion on this? If it invests in mutual funds, then isnt it by definition a PFIC. If so, what is the benefit of a PMS. A legal benami investment will make more sense.

nand;27354I am not sure if PMS escapes PFIC. Experts: What is your opinion on this? If it invests in mutual funds, then isnt it by definition a PFIC. If so, what is the benefit of a PMS. A legal benami investment will make more sense.

I was referring to PMS account that invests in stocks. Such PMS account does not fall under PFIC because *stock* investments are done under client's name. Demat account in client name, Brokerage account in client's name, Bank account in client's name.

pjigar;27405I was referring to PMS account that invests in stocks. Such PMS account does not fall under PFIC because *stock* investments are done under client's name. Demat account in client name, Brokerage account in client's name, Bank account in client's name.

Great!! Finally I see something that is not subjected to PFIC.

I would love to know the outcome of this thread as it would be a great alternative to investing in Mathew's or other US based funds.