Who is Portfolio Manager?

A portfolio can be defined as a collection of investments like stocks, commodities bonds, cash and cash equivalent exchange, trade funds, closed-end funds etc. Portfolio management can be complex and tiresome for the investor therefore, the investor appoints a Portfolio Manager for such management.

A Portfolio Manager is a body corporate that is responsible for managing, advising and supervising a portfolio, on behalf of the client, in exchange for a fee; the main function of the Portfolio Manager is to manage the investor's funds in a way  which provides maximum benefits and a good return on  investment. Portfolio Managers are also known as fund managers.

It is essential for the body corporate to be registered as a portfolio manager as per the regulations of SEBI before carrying out the required activities. The regulations are provided under SEBI (Portfolio Managers) Regulations, 1993. 

Role of Portfolio Managers

The role of the Portfolio Manager is explained below 

• Making investment decisions on behalf of the clients to provide them with the best returns for their investments 
• Creating investment strategies and managing portfolios. 
• Determining the income, age and capacity to take risk to ascertain the best investment plan for the client.
• Informing the client about the various investment opportunities available in the financial market 

Types of Portfolio Manager

The Prominent type of Portfolio manager is:-

• Stock Portfolio Manager

These managers are experts in the stock market and help clients allocate funds among a number of securities depending on the client's risk tolerance.

• Growth Portfolio Manager

These professionals actively invest money in assets with high growth rates. However, they work for clients having a higher risk tolerance and seek to make a quick profit.

• Income Portfolio Manager

 Here the portfolio managers work towards providing a safe and decent investment return over a long period.

Benefits of Portfolio Manager

The advantages of having a portfolio manager are given below-

Maximum Return

The manager provides a structured framework for analysis and selecting the best class of assets. The investor can earn a high return with limited funds.

Manage Liquidity

Investors can choose assets in such a pattern with the motive to sell them quickly whenever they need funds.

Avoids Risk

Due to the volatility of the securities market, investing in securities is very risky and has a high potential for loss. Portfolio managers help to mitigate risk by diversifying it to securities. 

Improve Financial Understanding

They help in improving the financial knowledge of the investor about managing their portfolio and financial concepts along with the working financial market, which will enhance financial understanding.

Helps To Make The Right Investment Choice: -

They enable the client to make more informed decisions regarding investment plans in accordance with goals and objectives.

Steps Involved in Portfolio Management.

Identification of the objectives and Constraints

For a good investment portfolio, the investor has to identify all the objectives which can provide decent return or appreciation in the capital, which can be done with the help of a portfolio manager 

Analyses of Capital Market

Past Performance and future expectations of a company is analyzed, to help in identifying the company's track records for expected Returns and Risks associated with it.     

Strategic Asset Allocation

The manager makes strategic asset allocation to ensure less Risk and good Return.

Analysis of the Securities

Securities are analyzed on the basis of their price, Risk attached to them, expected Return etc.

Execution of Portfolio: - 

After the selection of securities, the next step is to execute the Securities by investing, including the buying and selling of securities.

Revision of Portfolio:

After the execution, constant supervision  regarding the returns of the portfolio to check if it is  providing the Return on investment or not. Revision of portfolio means addition and deletion or shifting of stock or bonds or mutual funds or Government Securities. 

Evaluation of Portfolio

 It is important to conduct constant evaluation of the financial market in order to provide a good return on investment, risk factors, and future projection of the company, which also includes an assessment of the advantages and disadvantages of the portfolio.        

Eligibility Criteria for the Registration of Portfolio Manager with SEBI

The following Eligibility Criteria must be fulfilled for the Registration of Portfolio Managers with SEBI -

• The applicant must have a professional qualification in finance, accountancy, law, or business management from a university or an institution recognized by the Central Government or any State Government or a foreign university.
• It is mandatory for the applicant to have Experience of  minimum ten years in related activities in the securities market,  a stockbroker, a portfolio manager, or a fund manager.
• CFA charter from the CFA Institute.
• The  applicant's capital requirement of INR 2 CR must be fulfilled.
• The applicant must have adequate infrastructure like manpower, office space, and equipment to efficiently conduct the portfolio manager's work.
• The applicant must provide disclosure of all information related to Disciplinary action initiated against the applicant or rejection of earlier applications made by the applicant or involved in any litigation. 
• The applicant should be a fit and proper person.

Procedure for Registration of Portfolio Manager with SEBI

The following procedure must be followed for the registration of Portfolio Managers with SEBI 

Filing the Application Form 

The applicant is required to file FORM A to the SEBI with Rs. 1 lakhs non - refundable fee.

Submission of Form and Verification of Application by SEBI 

After the Application form is submitted by the applicant, the form is verified by the officials of SEBI. The board will scrutinize the application  to check whether the application has  complied  with  the SEBI provisions. The board may demand further information or call the applicant to appear in person in case of any discrepancy or non compliance

Grant of Registration Certificate 

If the board is satisfied with the entire requirement mentioned above, the certificate of registration granted in FORM B.

Post Registration Compliances Regarding Portfolio Manager Registration with SEBI

The post-registration conditions that are required to be satisfied by the registered portfolio manager are enumerated below.

• The portfolio manager needs to inform the board about any change in the status and constitution of the portfolio manager and obtain prior approval from the Board for the same.
• In case there is any complaint from an investor, the portfolio manager is required to take adequate measures for redressal of such grievance, which must be resolved within one month.
• It is necessary for a portfolio manager to  maintain a record of a number of complaints, their nature, and other particulars, along with conveying the same to the board

• The portfolio manager is required to maintain a net worth of a minimum of 5 crore rupees at all times.
• The portfolio manager can accept a minimum of fifty lakh rupees or securities having a minimum worth of 50 lakhs rupees from the client.
• The manager must abide by all the rules and regulations made under the Act.