Portfolio Management Services (PMS), a specialised investment service, can be described as sophisticated cousins of mutual funds.
Tailored for the rich, the minimum investment requirement for a PMS fund is Rs 50 lakh. These services offer a niche approach to wealth creation, catering to client's investment preferences. PMS fund managers usually don't shy away from taking a bit of an extra risk to get more rewards.
For the services rendered, portfolio managers charge three types of fees - fixed only, profit-sharing only and hybrid. Between the three fee options, fixed fees are levied either quarterly or monthly on the average value of the portfolio.
Performance fees in the profit-sharing option are charged yearly, if the portfolio performance is greater than the “hurdle rate”.
In the case of hybrid-fee option, the portfolio managers charge both fixed and profit-sharing fees.
Similar to mutual funds, PMS funds offer both direct and regular plans. PMS Bazaar, in its analysis of 349 regular funds (those distributed through distributers and usually have higher fees) found that 184 funds offer all three PMS fee options and investors could choose any one.
About 100 funds offer only the hybrid option, while 58 offer fixed-only and seven profit-sharing only as fee options.
Apart from fees, investors may also have to pay additional charges such as operating expenses custody charges and so on, which may or may not be part of the fund management fees.
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