Definition
A mutual fund collects monies from different individuals and entities and invests the amount collectively in instruments/assets depending on investment objectives.
Portfolio Management Services provide wealth management services to High Net worth Individuals. A PMS collects substantial amounts from wealthy investors and invests the money in different asset classes. It promises to deliver higher returns as compared to other investment avenues. It promises customized investment services that mostly means that they offer investors different model portfolios. Investors can choose a model based on their needs and goals.
There are  two types of portfolio management services (PMS) –
Discretionary PMS  – The portfolio manager individually and independently manages the clients’ funds.
Non-discretionary PMS – The portfolio manager manages the funds as per instructions of the client.

Investment Amount Required
You can invest in an MF scheme with an amount as low as ₹500. Typically in PMS, the  minimum investment has to be ₹50,00,000.

Investment Style
Mutual fund managers have to follow SEBI regulations related to investment and diversification. PMS managers need not follow many rules. They can increase allocation to certain securities or invest in riskier products. The PMS model also has a more concentrated portfolio as compared to an MF scheme.

Fees
Mutual funds charge management expenses and exit load (based on certain conditions). The fees depend on the type of mutual fund scheme but it is capped by SEBI regulations.
PMS firms charge management fees of 1% to 3% of the investment on a quarterly basis. Most PMS schemes also charge a fee based on performance. For example, they might charge additional fees or a share in the profit (10%-20%) if the returns are above a certain hurdle rate.

Transparency and Accountability
PMS gives you details related to the transaction such as date, amount, fees, profit/loss, etc. MF managers do not have such obligations. Mutual funds are well regulated by rules laid down by SEBI that have been existent for quite some time and get revamped regularly. Till recently there were not too many guidelines for PMS. But recently, SEBI released a set of regulations –

• No upfront commissions to distributors
• Increase in minimum investment amount from ₹25,00,000 to ₹50,00,000
• Maximum exit load of 3% in the first year of investment, 2% in the second year and 1% in the third year and nil thereafter.
• Option of ‘direct’ investment to be given to investors

Performance and other details of mutual fund schemes are available as public records unlike for PMS. PMS firms give information but it might be biased. They do not have standard performance benchmarks though it is slowly changing. Ask the PMS manager for comparative performance figures and client references for clarity and transparency.
You can compare MF schemes. Many are operational for numerous years which means better data. PMS schemes cannot be compared and most of them have recently begun operations. Therefore, data points are less.
Check with the portfolio manager about the investment performance and ask pointed questions to get information directly. This is not possible for MFs.

Taxation
Taxation is pretty much the same for both except that tax is applicable on MF schemes when you exit the scheme whereas, in PMS tax is incurred for every transaction.

Documentation
Documentation is simple for MFs. Do your KYC and invest across schemes. The documentation for PMS schemes is quite comprehensive and you will have to do it for every firm you engage with.

Final Word
MFs are easy to invest in. You can start investing with minimal documentation and a small amount. You can increase or decrease your allocation smoothly. MF schemes are less risky as compared to PMS investments. For example, MFs cannot invest in derivative products but PMS portfolios can have any type of product but not in unlisted securities as per new rules. PMS firms are not as tightly regulated as MFs.
PMS firms require a significant investment amount. You may want to invest with more than one PMS firm as it is not a great idea to invest all your money with one PMS firm. They promise higher returns but they come at a higher risk. So they make sense only if your net worth is big and you have the requisite risk tolerance and risk aptitude. As PMS firms get more regulated, transparent and, cost-efficient, they can be used as an opportunity to generate returns.