Mumbai: Reliance Money, the financial services arm of Reliance Capital Ltd, plans to launch portfolio management services (PMS), where managers will create a basket of stocks for each client, based on individual needs, for amounts as low as Rs5 lakh.
Such services are popular in India but almost all the offerings of large finance companies target high networth individuals (HNIs) with the ability to invest Rs1 crore and above.
Reliance Money, which helps clients invest in equities, derivatives and commodities, will typically offer such services for amounts between Rs5 lakh and Rs75 lakh; Rs5 lakh is the smallest amount the industry’s regulator mandates for PMS. Reliance Money will launch its PMS in December and will especially target executives and professionals in metros and smaller towns.
“Portfolio management has been an exclusive club and we want to break that,” said Sudip Bandyopadhyay, the company’s chief executive. “We want to broaden the market,” he added.
Bandyopadhyay said Reliance Money would not take a fee unless the portfolio earns a return higher than 8%. If the client earns a return of 8-20%, the fee charged will be 10% of the absolute returns and if the client earns more than 20%, the fee will be 20%.
The company plans to offer a large-cap investment portfolio (where the stocks invested in will be those of large-cap companies), blue chip portfolio (blue chip companies) and an infrastructure portfolio (companies in the infrastructure sector).
The Bombay Stock Exchange’s benchmark index, Sensex, has grown at 35.91% so far this year and there is a growing interest in investing in mutual funds and portfolio management services.
Smaller stock brokerages such as Angel Broking Ltd and Emkay Share and Stock Brokers Ltd also offer portfolio management services.
Executives in the finance industry say Reliance will need to address challenges related to scale and service.
“There has been a proliferation of broking firms offering portfolio management (services), not all of which are in the high-end segment,” said Sameer Kamdar, country head of Mata Securities, a mutual fund distribution company. “It is not surprising that Reliance is offering this. The challenge for them is how much they can grow the market.”
Reliance Money, which started operations in April, already has around 250,000 investor accounts and 3,000 outlets.
“With the market in a bull run, there are individual investors who feel they got left out of all this and such a service would help them,” said Kartik Jhaveri, director with Transcend India, which provides financial planning services. “The problem with offering these services on a mass scale is that clients may now get mass treatment,” he added.
But Bandyopadhyay said the company will use its distribution network that reaches almost 1,000 cities, and set up Web-based interfaces, a centralized help desk, and fund managers to serve a potentially larger client base.