PMS Vs MF The Big Fight

How do mutual funds and portfolio management services match up? Know the score on structure, rules, entry fees, charges, and tax perks to pick the right path for your financial journey

- TEENA JAIN KAUSHAL

PIYUSH BANSAL, A Delhi-based IT professional working for a multinational firm, has been investing in mutual funds (MFS) since his first job. As his portfolio has grown substantially over the years, Bansal, now 35, is contemplating a shift towards portfolio management services (PMS) to further customise his portfolio for greater returns. I've been investing in MFs since a young age. Now that my assets have grown and my income has increased, I am exploring alternative options to boost the return from my portfolio. However, I am unsure if PMS is the right choice for me, Bansal remarks.

Like Bansal, many are keen to put their money in PMS schemes in the hope of generating higher returns on their investments; but why PMS? This is because PMS has the edge in creating higher alpha over MFs in the long term due to its customised and concentrated structure. However, PMS carries a higher risk as well. So, it is crucial for investors to choose the right PMS.

A study by PMS Bazaar of 335 PMS investment strategies and 388 MFs (regular) across one-, three-, five-, and 10-year periods reveals that PMS strategies outperformed their benchmarks by 70% on average, while MFs managed a respectable 48%. But before you hop on the PMS bandwagon, it is important to grasp the distinction between the two, though comparing them directly may not be entirely fair, as they cater to different financial needs and risk appetites.

PMS VS MF