Category: Investment Management

Portfolio Management Service vs Mutual fund Investment

PMS vs. Equity Mutual Funds: A Comparative Analysis

A Portfolio Management Service (PMS) is a specialized wealth management service where qualified fund managers handle investors' money by strategically investing in a diverse portfolio of assets, such as stocks and fixed income securities, for a fee. Some key features of PMS include:

  • Different types of schemes with unique strategies and objectives.
  • Three main types: Discretionary (manager has authority), Non-discretionary (client confirms decisions), and Advisory (manager provides advice).
  • Minimum investment amount as per SEBI regulation is ₹50,00,000.
  • Regulated and governed by SEBI.

In some ways, PMS is similar to Mutual Funds (MFs), which also pool funds from investors and are managed by qualified professionals. An Equity MF primarily invests in equities and related assets. Investors often face the dilemma of choosing between PMS and MFs. Here's a comparison of their advantages and disadvantages.

Performance: This is a crucial factor for most investors. While past performance doesn't guarantee future returns, it offers valuable insights. Some PMS funds outperform Mutual Funds, mainly due to their independence in buying and selling assets.

Customization: PMS offers tailored portfolios for select investors, whereas MFs are designed for a broad investor base. PMS allows investors to decide on specific sectors, capitalization, and allocation, leveraging the expertise of portfolio managers.

Flexibility: PMS provides flexibility to adjust equity allocation based on market conditions, potentially outperforming markets. In contrast, MFs must adhere to regulatory guidelines.

Focus: PMS can prioritize performance and absolute returns, while MFs must follow diversification and valuation rules.

Investment Status: PMS treats each portfolio uniquely, considering individual needs and risk profiles, unlike MFs that pool investments regardless of individual differences.

Transparency: MFs are strictly regulated, with all information publicly available, allowing easy performance comparison. PMS, while required to disclose information to clients, lacks public transparency.

Fees: PMS charges various fees, including entry loads, management fees, fixed fees, or performance fees. Some PMS providers charge fees based on profits generated.

Taxation: MFs offer tax advantages with capital gains taxed only upon redemption. PMS taxation is less efficient, with capital gains taxed on each transaction.

Process and Documentation: Investing in MFs is straightforward, with multiple channels available. PMS involves more documentation and time due to higher transaction values.

Both MFs and PMS have their pros and cons, catering to different investor preferences. Investors seeking customized portfolios, absolute returns, specific stock selection, or thematic investing may opt for PMS.


Vidya Kumar Dilzer Consultants Pvt Ltd