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Upstox Originals

Are PMS investment crucial to boost your long term wealth creation?

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By Jay Mehta

2 min read | Updated on September 20, 2024, 16:49 IST

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SUMMARY

On comparing the performance of portfolio management services (PMS) with traditional mutual funds, we found that MF investors are able to generate just as much if not better returns. This clearly shows that “keeping it simple” is in no way detrimental to your wealth creation journey. Read on to find out more.

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Mutual funds on average have generated equal if not better returns than PMS for their investors.

Portfolio Management Services (PMS) continue to remain popular in India. with their assets under management (AUM) increasing faster than that of mutual funds (MFs). This trend is interesting to note considering that PMS investing requires a minimum ticket size ₹50 lakh (which was ₹25 lakh before November 2019). This prompted us to look at their performance and evaluate whether investors who are unable to invest in these funds (due to ticket size constraints) are really missing out on wealth creation in their investing journey.

Growth in PMS assets under management (AUM)* PMSPic1.jpg
Source: Press release, Upstox; *Total AUM (Equity, Debt and others) basis latest available data
What do the returns say? As mentioned in the beginning, we evaluate the performance of various PMS funds, simply aiming to find out – should MF investors have a FOMO of not being able to invest in PMS funds? Is their wealth creation being hampered? We compare the gross returns (before fees) of equity PMS and active equity MFs across different categories (as of 31st March 2024) and note that mutual funds on average have generated equal if not better returns for their investors. Please note that the returns below are gross (before fees). Even here, fees of an average active MF are ~1% versus the 2-2.5% in PMS schemes.
Gross Active Equity PMS versus MF scheme returns as on 31st March 2024* PMSPic2.jpg
Source: PMS Bazaar, AMFI, Upstox; *In our analysis, we have excluded PMS that have been in existence for a year or lesser, **Disclosed AuM in case of PMS.
What does this mean for investors? There are PMS funds that have delivered staggering performances. Like MFs, an investor must research the fund’s investment strategy, asset allocation and fund manager’s track record, among others.

On an encouraging note, conventional and sometimes boring mutual funds continue to be an extremely viable option for long-term wealth creation.

Happy Investing!
Disclaimer: Views and opinions expressed in the article are the author's own and do not reflect those of Upstox.
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About The Author

Jay Mehta profile pic 1.jpg
Jay Mehta is a Senior Manager - Research at Upstox. He has 10 years of experience in capital markets, spanning equity research, treasury management, investor communication/relations, corporate strategy, and business finance.

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