Common Answers to Common Questions- 4

In what way mutual funds is different from Portfolio Management?

In mutual funds, the objective and process are decided first and then investors are sought. In portfolio management, an investor approaches an expert to do the investments on his behalf. Mutual funds are for every one without any reference to the size of individual investment. As per Guidelines of SEBI, a portfolio manager, can manage accounts with a minimum size of Rs. Five lacs.
A portfolio manager can be an individual whereas a mutual fund can not be run by an individual. There are clearly defined entities in forming and running a mutual funds: Sponsor, Trust , Asset Management Company. The regulations of SEBI clearly defines the roles of each entity.

A portfolio manager can manage the portfolio either on discretionary basis or on non- discretionary basis. A mutual fund is always on discretionary basis with clearly defined objectives and asset classes on which investment can be made. There are no limits or guidance on the amount of fees by a portfolio manager, whereas there are limits imposed by SEBI on the amount of fees and expenses.