As the norms around distributor commissions get tighter and margins of mutual fund houses reduce, fund houses have begun to look at other sources of income to keep their cash flows healthy. The share of portfolio management services (PMS) fees in their income went up to 6% for financial year (FY) 2015-16, as per a Mint analysis of 41 fund houses’ annual statements, based on Value Research data. In FY15, they had earned 4% of their total income from PMS. Broadly speaking, fund houses earn revenues from four sources: managing the money you put in mutual fund schemes, PMS, foreign advisory services and other income.
Portfolio management
A mutual fund vehicle is meant for retail investors and all its investors of a scheme have to follow a single strategy. Thus, fund houses find mutual fund schemes restrictive if they wish to attract high net worth individuals (HNIs). “A mutual fund scheme cannot hold a concentrated portfolio as there are caps on individual holdings. These restrictions are not there in PMS schemes,” said Aashish P. Somaiyaa, managing director and chief executive officer, Motilal Oswal Asset Management Co. Ltd.
