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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers

Under SEBI PMS regulations, which benchmark-related practice is required when a portfolio manager reports performance to clients?

Portfolio managers must report performance using the time-weighted rate of return method and compare it with an appropriate benchmark. This standardisation lets investors compare managers fairly, and selective or benchmark-free reporting is not permitted.

  1. APerformance must be reported using the Time-Weighted Rate of Return method, with comparison against an appropriate benchmarkCorrect
  2. BPerformance may be reported only for the best-performing client
  3. CPerformance must be shown only in absolute rupee terms
  4. DPerformance need not be compared with any benchmark

Explanation

SEBI requires portfolio managers to follow a standardised performance calculation, using the time-weighted rate of return (TWRR) method, and to disclose it against a benchmark. Selective reporting or no benchmark comparison is not allowed.

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