The pitch for mutual fund portfolio management services (MF-PMS) is seductive. Hand over your money to a professional, who will curate, allocate, and rebalance a portfolio of mutual fund schemes on your behalf. You get the simplicity and passive tax efficiency of mutual funds, with professional intent layered on top. For a high net-worth investor (HNI) drowning in 2,000-plus fund options, it sounds like the answer to every problem. It isn’t. The answer creates problems worse than the question.
Start with the math. An MF-PMS charges two layers of fees: mutual fund’s expense ratio (0.5-1%), plus the PMS layer itself (typically a fixed 0-0.5%, plus a 10-20% profit share on the returns above a hurdle). Allin cost: 1.1-2.5% annually. A direct mutual fund portfolio—four to six carefully chosen schemes—costs you the fund fee (0.5-1%), plus a flat-fee RIA charge of Rs.5,000 to Rs.10,000 per year. All-in cost: under 1.5%, usually less.
