The minimum investment under PRIM is ₹25 lakh, compared with ₹50 lakh for conventional PMS.
For investors considering the new route, the decision will involve factors such as the size and complexity of their existing mutual fund portfolio, the cost of professional management and the extent to which they want to delegate investment decisions.
Portfolio size and complexity
One consideration is whether an investor’s portfolio has become difficult to manage across multiple schemes and folios.
“PRIM is particularly relevant for investors who have a management problem rather than a returns problem,” said Divam Sharma, Co-Founder, Green Portfolio.
An investor with ₹25 lakh or more could have investments across several schemes, with overlapping holdings and no consolidated view of the portfolio, Sharma said. Under PRIM, a portfolio manager can manage fund selection, asset allocation, monitoring and rebalancing under a single mandate.
Anil Rego, Fund Manager, Right Horizons, said PRIM allows investors to delegate these functions to a professional portfolio manager while continuing to invest through direct mutual fund plans.
For investors who manage a simple portfolio themselves, the considerations can be different. Sharma said investors comfortable managing two or three index funds may not require professional management of the portfolio.
Cost of professional management
The cost of the portfolio manager is another factor. Under PRIM, investors bear the expenses of the underlying mutual fund investments and also pay the portfolio manager’s fee. The fixed component of the management fee is capped at 1% of assets under management.
At an investment of ₹25 lakh, a 1% annual fee works out to ₹25,000. Investors would therefore need to consider this cost along with the expenses of the underlying funds.
Sonam Srivastava, Founder and CEO, Wright Research, said the additional fee needs to be considered in the context of the services provided, including asset allocation, rebalancing and risk management.
The comparison may also differ depending on an investor’s existing mutual fund structure. Investors holding regular plans are already paying expenses that include distribution-related costs, while direct plans generally have lower expense ratios, Srivastava said.
Existing portfolio and taxation
For investors moving from an existing mutual fund portfolio, the tax impact of restructuring also needs to be considered.
Switching from one mutual fund scheme to another can result in capital gains and associated tax liability, depending on the nature of the investment and the holding period, Srivastava said.
Therefore, investors evaluating PRIM would need to look at their existing portfolio, the number and type of schemes they hold, current fund costs, potential taxation on restructuring and the extent to which they want to delegate portfolio management.
The framework essentially provides another structure for investors to have a portfolio of mutual fund investments professionally managed, while the suitability and cost implications can vary based on individual portfolios and investment preferences.