Portfolio management services
PMS
A portfolio held in your own name
A SEBI-registered portfolio manager manages a portfolio for you individually. Unlike a mutual fund, the securities are held in your own demat account.
individual, not pooled
Securities are held in your name rather than as units of a shared fund, so you see the actual holdings.
a higher entry threshold
SEBI sets a minimum investment of ₹50 lakh per client for portfolio management services.
at a glance
How this one behaves
Your own holdings, managed to a mandate, with a regulatory entry threshold that places it outside most portfolios regardless of its merits.
- Minimum
- ₹50 lakh per client, set by SEBI
- What you hold
- Securities in your own demat account
- Taxed
- In your hands, as if you held the securities directly
- Getting out
- Under your client agreement, with notice
how it works
Concentration is the defining characteristic
The structural difference from a mutual fund is not sophistication — it is concentration. A diversified equity fund may hold fifty or more companies. Many PMS strategies deliberately hold a much smaller number, on the basis that conviction is diluted by over-diversification. That widens the range of outcomes in both directions: a strategy that works can meaningfully outperform, and one that does not can underperform just as meaningfully. Anyone considering PMS should be comfortable with that trade-off specifically.
The mandate type matters. Under a discretionary mandate the portfolio manager makes buy and sell decisions without consulting you on each one — most PMS arrangements work this way. Under a non-discretionary mandate the manager recommends and you decide. An advisory arrangement provides advice only, with execution remaining entirely yours. The level of control, and of responsibility, differs substantially.
Fees deserve close reading. PMS fee structures are more varied than mutual fund expense ratios and materially affect net outcomes. A fixed fee is charged as a percentage of assets regardless of performance. A performance fee is charged on returns above a stated threshold — and the details govern how much you actually pay: what the hurdle rate is, whether there is a high-water mark so you are not charged twice for recovering the same ground, and how frequently performance is crystallised. Two managers quoting similar headline numbers can produce quite different net results.
Comparing managers is harder than it looks. Because portfolios are individual rather than pooled, two clients of the same strategy can hold slightly different portfolios and see different returns depending on when they invested and how cash was deployed. SEBI requires disclosure of performance in a prescribed manner, and the Disclosure Document is the primary source worth reading — alongside the specific terms of your own agreement.
Because the securities sit in your own demat account, you have full visibility of what is held and each transaction is reported to you. That transparency is a genuine advantage over pooled vehicles. It also means the tax consequences of the manager's transactions arise directly in your hands, which is worth discussing with your chartered accountant before committing.
pms or aif
Seven structural differences worth knowing
These two get compared on past returns, which is the least reliable basis for choosing between them. The differences below hold whichever manager you look at.
| Characteristic | PMS | AIF |
|---|---|---|
| How your money is held | Securities sit in your own demat account as direct holdings. You can see the actual stocks. | You hold units of a pooled vehicle. The fund owns the underlying securities, not you. |
| Pooled or separate | Managed separately for each client, within an agreed mandate. | Capital is pooled and managed collectively for all investors in the scheme. |
| Who it is open to | Individuals and eligible investors meeting the ₹50 lakh regulatory minimum. | Investors meeting the ₹1 crore minimum, plus institutions and accredited investors. |
| How gains are taxed | In your hands, at the rate applicable to you, as though you held the securities directly. | Category III funds are taxed at the fund level before anything reaches you. |
| Unlisted and pre-IPO exposure | Not part of the structure. | Permitted, up to whatever share of the portfolio the scheme documents allow. |
| Tenure | No fixed tenure. You can exit under the terms of your agreement. | Set by the scheme. Category I and II are usually close-ended over several years; some Category III schemes are open-ended. |
| If you are a non-resident | Can generally be funded from either an NRE or an NRO account. | Category III commonly accepts NRO money only — which matters if you want to repatriate. |
Minimums are regulatory thresholds, not quality signals, and both figures place these categories outside the range of most investors. See NRI investing for the non-resident detail.
Six fee terms to ask about before you sign anything
- Management fee
- Charged on assets, every year, whether the portfolio rises or falls. A structure with no management fee is not free — it is charging elsewhere.
- Hurdle rate
- The return that has to be cleared before any performance fee applies. A zero hurdle means the manager shares in the very first rupee of gain.
- High-water mark
- Stops you paying a performance fee twice for recovering the same losses. Ask whether it applies over the life of the investment or resets.
- Catch-up
- Where present, once the hurdle is cleared the manager takes an outsized share of the next slice of return until the split evens out. Ask whether there is one.
- Exit load
- A charge for leaving early, usually tapering over the first few years. It sets the real minimum holding period, whatever the stated tenure says.
- Custodian
- The institution that actually holds the assets, separate from the manager. Worth knowing the name, because it is a meaningful part of the safeguards.
Two structures with the same headline performance fee can leave you with materially different net returns once these six are taken together. Ask for the terms in writing, and read the disclosure document rather than the presentation.
risk
What can go wrong
Every investment on this site carries risk. These are the ones that matter most for this category.
concentration risk
Portfolios are typically far more concentrated than diversified funds, which widens the range of outcomes considerably.
no assured outcome
Performance depends on the manager's decisions and market conditions. Returns are not guaranteed and capital can be lost.
cost and exit risk
Fee structures can materially reduce net returns, and exit terms may restrict how quickly you can withdraw.
faqs
Questions about PMS
SEBI prescribes a minimum of ₹50 lakh per client for portfolio management services. This is a regulatory threshold rather than a manager's preference, and it is the main reason PMS is not relevant to most investors regardless of its merits.
Three main ways. Securities are held in your own demat account rather than as units of a pooled fund, so you see the actual holdings. Portfolios are usually more concentrated. And the minimum investment is far higher. Fee structures also tend to be more varied, sometimes including a performance-linked element.
You delegate day-to-day investment decisions within an agreed mandate — the manager buys and sells without consulting you on each transaction. You retain the ability to set the mandate at the outset, to review reporting, and to terminate the arrangement under its agreed terms. If per-decision involvement matters to you, a non-discretionary or advisory arrangement is the closer fit.
No. The minimum is a regulatory threshold, not an indicator of quality or of expected performance. PMS strategies vary widely in outcome and the dispersion between managers is significant. A higher entry point brings different characteristics — concentration, individual holding, varied fees — not better results.
Risk and important information
Portfolio management services are subject to market risk and there is no assurance or guarantee of returns. Portfolios are often concentrated, which can increase volatility and the range of possible outcomes, and investors may lose part or all of their capital. Performance varies between portfolio managers and between clients of the same strategy, and past performance does not indicate future results. Fees, including any performance-linked fees, reduce net returns. Please read the Disclosure Document and your client agreement carefully before investing. Nothing on this page is investment advice or a recommendation.
let's talk
Let's start with a conversation
There's no obligation, no pressure — just a conversation about where things stand and where you'd like to go.