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livemint.com / 1 year ago
economictimes.indiatimes.com / 1 year ago
economictimes.indiatimes.com / 1 year ago
Mutual funds vs portfolio management services: What’s right for you?
Different investment products cater to the distinct needs of various individuals. Mutual funds and portfolio management services (PMS) are examples of such products. While mutual funds have a ticket size of as low as ₹100, PMS schemes require a minimum investment of ₹50 lakh, mainly catering to high-net-worth individuals (HNIs).
By the end of 2024, the mutual fund industry had assets under management (AUM) of ₹66.9 trillion, while the PMS industry had a combined AUM of ₹37.1 trillion. The market regulator allows more flexibility to PMS fund managers totake aggressive bets with their clients' portfolios, potenially delivering higher returns than mutual funds which operate under stricter rules.
The result is a mixed bag. While some PMS deliver superior returns, investors are also more likely to be stuck with underperforming products. Mutual funds, in contrast, tend to offer more stable returns.
In this article, we analyse direct plans of mutual funds against PMS returns for new investors holding spare cash of more than ₹50 lakh.
Also Read: Why do regular plans dominate some types of mutual funds and not others?
It is a challenge to compare PMS and MF returns as they are not apples-to-apples comparisons. In MFs, equity schemes have distinct categories such as large, mid, small, flexi, multi-cap, etc. PMS operates under broader categories: equity, debt, hybrid, and multi-asset.
PMS benchmarks its returns with either Nifty 50 or BSE 500. while MFs have different categories with distinct benchmarks. To be sure, in October 2024, Sebi said PMSes could choose a secondary benchmark that was more specific but this was kept optional. APMI doesn't maintain data for secondary benchmarks.
Data provided by the industry body Association
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