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Investing in a mutual fund vs investing in a PMS is like getting operated under anesthesia vs. getting operated while seeing the whole procedure live on camera: Aashish Somaiyaa, CEO, White Oak Capital Management. (Photo: iStock)
Investing in a mutual fund vs investing in a PMS is like getting operated under anesthesia vs. getting operated while seeing the whole procedure live on camera: Aashish Somaiyaa, CEO, White Oak Capital Management. (Photo: iStock)

Mutual fund or PMS: Which one is suitable for you?

'In a mutual fund everything is inside that one number called NAV and its reporting, in a PMS the entire 'hisaab' is open for investors to see,' says Aashish Somaiyaa.

Usually, HNI or high networth individuals invest in Portfolio Management Services (PMS) as they can invest heavy amounts. But being a high net worth investor should not be the sole reason to invest in a PMS. "PMS is meant for investors who can tolerate some risk and have better tolerance, understanding and longer gestation for their investments," says Aashish Somaiyaa, CEO at White Oak Capital Management. Mutual funds on the other hand are a mass retail vehicle.

Transparency

PMS offers a very high level of transparency in terms of the information that goes across the investors, it needs maturity to handle that level of transparency. Somaiyaa puts investing in mutual funds vs investing in PMS, this way,

"it like getting operated under anesthesia vs. getting operated while seeing the whole procedure live on camera."

Somaiyaa goes on to explain that sometimes we are prone to thinking what we don’t see is not happening, which we know is actually a false understanding. In a PMS you can literally see every trade, price of execution, brokerage, STT, you can get details of every expense incurred to manage the portfolio etc., all of this is true for a mutual fund but mutual funds are managed like a generic pool and hence they don’t disclose all these details - doesn’t mean they don’t buy and sell or incur myriad expenses.

"In a mutual fund everything is inside that one number called NAV and its reporting, in a PMS the entire "hisaab" is open for investors to see."

Returns/ Performance

Given the flexibility that PMS mandates provide they have potential to do better than mutual funds but it needs more maturity and risk tolerance from investors.

Aashish Somaiyaa has joined White Oak Capital recently in September this year. Earlier he was MD & CEO at Motilal Oswal Mutual Fund.

White Oak Group manages about USD 1.7bn for foreigners investing into India through fund vehicles domiciled in London, Dublin and Mauritius through its Singapore AMC. White Oak Capital in India also manages nearly 3,000 crore worth of equity portfolios for domestic HNIs through its AIF and PMS licenses.

"Over the next year or two we have an ambition to launch domestic mutual fund offerings subject to regulatory approvals. The plan for WhiteOak Group is to emerge as an India equity manager of choice for Indian and Global investors alike and then at some stage in future also introduce global equity strategies riding on the back of the founder and the investment team's expertise," says Aashish Somaiyaa.

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