Investing ₹50 lakh in a professionally managed portfolio does not mean handing over money to a fund and receiving units in return. In Portfolio Management Services (PMS), investors own the underlying securities directly, while a professional manager makes investment decisions according to an agreed mandate.
This offers greater portfolio visibility and customisation than mutual funds, but also comes with higher costs, concentration risks and a different tax treatment.
India’s PMS industry manages around ₹44 lakh crore in assets and has approximately 2.23 lakh client accounts, according to the Association of Portfolio Managers in India (APMI) data for July 2026.
With the minimum investment requirement at ₹50 lakh, here is what investors should understand before considering PMS.
How does PMS work and what does it cost?
PMS is a SEBI-regulated service in which a portfolio manager manages securities held in the investor’s own demat account. The assets are held with an independent custodian and are not pooled with other investors’ money.
According to Sandeep Jethwani, Vice Chairman of APMI, PMS is a mandate rather than a fund. Depending on the arrangement, it can be discretionary, where the manager makes investment decisions; non-discretionary, where the investor approves transactions; or advisory, where the investor executes the recommendations.
The minimum investment is ₹50 lakh, in cash, securities or a combination of both.
Fees can include a fixed management charge, a performance-linked fee or both.
Ajay Parmar, Head of Alternate Products at Jainam, says fixed fees generally range from 1% to 2.5% annually, while performance fees may be linked to returns above a specified hurdle rate.
Investors should also check the high-water mark, operating expenses and exit-load conditions.
Sonam Srivastava, Founder and CEO of Wright Research, highlights that performance fees are subject to the high-water mark mechanism, while upfront fees are not permitted.
PMS vs mutual funds vs AIFs: How are they different?
The three investment options differ in their entry requirements, ownership structures, liquidity and investment strategies.
ParameterMutual fundsPMSAIFsMinimum investmentCan start with a few hundred rupees₹50 lakhGenerally ₹1 croreStructurePooledIndividual portfolioPooledOwnershipMutual fund unitsSecurities in investor’s nameUnits or interests in a fundCustomisationLimitedHigherDepends on fundLiquidityDaily in open-ended schemesSubject to portfolio liquidity and exit termsOften limited or subject to lock-inTaxationGenerally on redemptionOn individual portfolio transactionsDepends on category and tax provisions
Mutual funds offer relatively easy entry, diversification and liquidity. PMS provides direct ownership, visibility of individual holdings and greater scope for customisation. AIFs offer access to strategies such as private equity, private credit and long-short investments, depending on the category.
Srivastava says investors should consider how much transparency and customisation they need, their liquidity requirements and their comfort with putting a substantial amount under one manager.
Jethwani adds that these products should be viewed as different portfolio tools rather than successive steps that investors must take as their wealth increases.
What PMS strategies are available?
PMS strategies broadly fall into four categories: equity, debt, hybrid and multi-asset, as outlined by APMI.
Equity strategies can focus on large-cap, mid-cap, small-cap, multi-cap or sectoral investments, while some follow value, growth or quality-based approaches. Debt strategies vary by duration and credit quality. Hybrid strategies combine equity and debt, while multi-asset approaches invest across different asset classes.
Investors can also choose between discretionary, non-discretionary and advisory arrangements, depending on how much decision-making control they want to retain.
Parmar says the strategy should match the investor’s risk appetite and investment horizon.
Srivastava suggests examining whether the portfolio follows a judgement-based or systematic investment process and whether it fills a genuine gap in the existing portfolio.
What risks should investors watch out for?
PMS does not offer capital protection, and direct ownership does not eliminate market risks.
Key risks include:
- Concentration risk: Some strategies hold around 20-30 stocks, potentially increasing exposure to individual companies or sectors.
- Market risk: Equity portfolios can experience significant losses during market corrections.
- Manager risk: Investment outcomes may depend heavily on the portfolio manager’s decisions and investment process.
- Liquidity risk: Selling less-liquid securities can take time and may involve costs.
- Taxation: Individual portfolio transactions can trigger capital gains tax, unlike mutual funds where taxation generally arises when units are redeemed.
Srivastava also flags the importance of understanding a strategy’s mid-cap and small-cap exposure, particularly when evaluating its performance during volatile markets.
Checklist: What should investors check before choosing a PMS?
Past returns should not be the only criterion when selecting a portfolio manager. Investors should examine:
- Track record: Compare time-weighted returns, net of fees and expenses, against the prescribed benchmark and similar strategies.
- Market performance: Check portfolio drawdowns and recovery periods, not just three-year returns.
- Investment team: Examine the team’s experience, continuity and dependence on a single fund manager.
- Fee structure: Understand fixed charges, performance fees, high-water marks and exit loads.
- Risk controls: Check portfolio concentration, investment limits and the manager’s stated investment philosophy.
- Regulatory compliance: Verify SEBI registration, custodian arrangements, disclosures and grievance-redressal mechanisms.
Jethwani recommends assessing whether the manager has followed a consistent investment philosophy across market cycles.
Parmar also advises investors to read the Disclosure Document and client agreement carefully, while Srivastava suggests asking managers to explain the market conditions in which their strategy is likely to underperform.
Ultimately, the decision to invest in PMS should depend on the role it plays in the overall portfolio, the investor’s ability to tolerate losses and the time for which the money can remain invested.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.
