A realty scheme delivers 3% over three years and a consumer-focused PMS loses capital. Investors never learn and eagerly put money in the next PMS pushed by their ‘relationship manager’
A big fund house recently announced the redemption of a three year real estate portfolio management scheme (PMS). Investors were happy as they got back a total of 103% of the money they invested. Yes, a pathetic return, but the investors were happy to see their principal back. Of course, it is more psychological than logical. In real terms, probably each investor lost around 30%, if purchasing power is factored in! Not a very prudent investment. Several interesting takeaways from this are:
The ending of this PMS story was still positive. Many others have lost large chunks of the principal. Still, even today, PMS continue to lure investors.
I happened to see a PMS account statement of a gentleman who had invested money in a scheme focused on the 'consumption' theme. In one year since investment, the person was down 11%, in spite of the scheme keeping cash balance of close to 45%! In the same period, the sensex has yielded a return of 20%! My guess is that there has been active churning and trading in the PMS which would have eaten away most of the money. Investors never seem to learn!
The latest among the PMS are the 'debt' PMS, which promises returns of around 20% per annum for 3-5 years. The collected money is lent to investment companies belonging to industrialists who in turn pledge their holdings in listed companies. The money is used by the investment companies to either buy more shares or to manipulate share prices. Not all the investment companies are actually disclosed to be promoter entities as per the official records. And since there are no investment limits etc on PMS, often, the entire pool of money is lent to one entity! This is nothing but pure money lending through the backdoor with huge risks! For selling these funds, the distributor can get 2-5% commission, upfront.
It is rare that PMS give returns higher than mutual funds. In spite of that, people with too much money, seem to easily get conned by the sales folk who push PMS at them because the selling commission is much higher than a mutual fund. It is time the market regulator raised the minimum ticket size for PMS to at least a few crores of rupees. Then, it is a case of the rich putting their money knowingly. Today, people with less than even a crore of investment portfolio, are being lured into PMS. Of course, they too do not deserve any sympathy, but greed is a normal human tendency and if the regulator can curb it somewhat, some investors would be protected.
Banker, broker, leader, fixer—will India ever emerge from their clutches? There seems to be a...
New Delhi: The growth of six infrastructure industries slowed to 2.3% in November, the lowest in the current fiscal, mainly due to contraction in production of cement and petroleum refinery products. The sectors-crude oil, petroleum refinery products, coal, electricity, cement and finished steel-had expanded by 5.9% in November last year, reports PTI.
Petroleum refinery output contracted by 3.7% and that for cement was lower by 11.6% in November, according to data announced by the industry ministry today. In November last year, refinery production expanded by 4.8% and cement by 9%.
Coal production also saw sluggish growth of 0.7% this November compared to 4.7% in the month last year. Growth in the finished steel sector too was slow at 4.4% compared to 11.7% in the month last year. However, crude oil production was better at 17%. The sector had contracted by 1.6% in November 2009.
During April-November, the core sector, which contributes about 27% in the Index of Industrial Production (IIP), grew by 5%, against 4.5% in the corresponding period in 2009-10. The growth figure for October has been revised upwards to 8.6% from the earlier 7%.