Portfolio Management Service Versus Mutual Fund Schemes

Independent portfolio managers, brokerage firms and asset management companies (AMCs), or fund houses offer Portfolio Management Service (PMS) schemes. Similar to mutual funds, PMS are customised investments while taking into account the risk capacities of the investors. 

With PMS and MF, even though an investor invests in similar stocks, the implementation and management of these two schemes are quite different. Also, their portfolio construction strategies are not similar. 

Although designed by professionals, MFs are not customised. On the other hand, PMS is focused on personalised funds. While adopting a collaborative strategy for their clients, managers tend to create portfolios independently with a focus on each client.

The beginning limit of MF could be just Rs 500, while the lowest limit for PMS is anywhere in the range of Rs 25 lakh.

MFs and PMS are both guided investment tools, which can aid in buying of stocks in the same general market. However, the approaches are different in both cases. In an MF, could witness a wider variety of stocks, which could be more than 40-50. An investor gets the option to choose based on the risk appetite and financial goals in the long run. 

While being costlier, PMS is much more curated and portfolios may not have more than 20-30 stocks at once. In addition, PMS are tailored as per the investor. This provides more control over the composition of the portfolios. With fewer regulatory controls than MFs, PMS is comparatively risky. That is exactly the reason why the returns in the case of PMS are on the higher side. However, PMS tend to attract higher fees and taxes as compared to MFs.

Also, PMS is required to furnish information to the client alone, the same data is not available to the general public. On the other hand, all the data related to MFs is in the public domain.