Working with money managers (listed equity mutual funds/PMSs/AIFs) is the aspect of the investment process that is typically the most exciting for investors but possibly contributes the least to their wealth growth. Observing those who are most obsessed with money managers is one of the most effective methods for identifying investors who are likely to have relatively little success over time.

First reason - their services are overpriced in comparison to the value they deliver to consumers. Look no further than the expense ratios of actively managed large cap funds, of which 93.8% underperformed the S&P BSE 100 benchmark over a five-year period according to the SPIVA CY year-end report for 2022. If mutual funds struggle to outperform the benchmark, PMS products should be the solution, right? The overwhelming majority of relatively expensive multi/flexi cap PMS products have underperformed their respective categories in the mutual fund industry. Due to the pass-through of the cap…