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GlossaryGeneral

PMS

Portfolio Management Services

A SEBI-regulated service in which a portfolio manager manages securities held in your own name, with a high minimum investment.

Portfolio Management Services are offered by SEBI-registered portfolio managers who manage a portfolio of securities on your behalf. Unlike a mutual fund, where you own units of a pooled scheme, a PMS portfolio sits in your own demat account: you directly own the shares or bonds the manager buys.

Why it matters

PMS offers a more concentrated or customised approach than most mutual funds, with direct ownership and a dedicated manager. It also comes with a much higher minimum investment, different fee structures and, often, higher concentration risk.

How to read it

  • Discretionary or not. In discretionary PMS, the manager decides; in non-discretionary PMS, the manager proposes and you approve each transaction. Advisory arrangements also exist.
  • Fees. PMS can charge fixed fees, performance-linked fees or both, plus other costs. Understand exactly how fees are calculated before comparing returns.
  • Concentration. Many PMS strategies hold fewer stocks than a typical equity fund, which can magnify both gains and losses.
  • Tax. Because you own the securities directly, each purchase and sale by the manager can create capital gains in your name.

Common misconceptions

  • “PMS always outperforms mutual funds.” Outcomes vary widely between managers and periods. Compare performance after all fees, against a suitable benchmark.
  • “Direct ownership means lower risk.” It changes the structure, not the market risk.

In India: Under current SEBI rules, the minimum investment in PMS is ₹50 lakh per client. Each portfolio manager’s disclosure document sets out its fees, risks and performance; read it before investing.

Related terms

  • AIF

    Alternative Investment Fund

    A privately pooled, SEBI-registered investment vehicle — such as a private equity, venture or hedge-style fund — typically for high-net-worth investors.

  • Equity

    Ownership in a company through its shares; equity investors share in the company’s growth and profits, and bear the risk of losses.

  • Diversification

    Spreading money across different investments so that a loss in any one of them has a limited effect on the whole portfolio.

  • Capital gains

    The profit made when you sell or redeem an investment for more than it cost; taxed as short- or long-term depending on how long you held it.

  • Benchmark

    The index a fund’s performance is measured against, chosen to represent the market or segment the fund invests in.