India’s wealth management space is growing quickly, and Portfolio Management Services (PMS) are becoming a popular choice for investors looking for actively managed, high-conviction equity portfolios.

For anyone exploring PMS services in India or comparing PMS returns, it is important to understand both the rewards and the risks involved.

Therefore, this article offers a clear, research-based view of the real opportunities and challenges in PMS investing.

The Reward Perspective: Why PMS Appeals to Serious Investors?

Scope for Enhanced Returns

PMS portfolios usually hold a focused basket of around 15 to 30 high conviction stocks, enabling managers to deliver performance beyond benchmark indices and conventional mutual funds. 

Industry performance trackers show that several leading PMS strategies have generated significantly stronger annualised returns, particularly in mid-cap and thematic categories.

In select market phases, top performers have delivered annual returns ranging between 30% to 45% (approx.), reflecting the power of concentrated positions and agile decision making.

Customisation and Active Professional Management

Unlike mutual funds that work within broad mandates, PMS portfolios can be shaped to match an investor’s risk appetite, financial goals, and investment horizon, while also providing direct ownership of the underlying securities.

Advisory platforms such as PMS AIF WORLD focus on building portfolios that truly align with individual goals, helping investors choose strategies based on the manager’s philosophy, sector approach, and risk profile, instead of depending only on past performance.

Growing Importance in the Alternative Investments Ecosystem

The combined PMS and AIF industry in India has expanded rapidly in the past few years and now manages assets running into multiple lakh crore. This growth clearly shows the rising confidence of HNIs and NRIs who are seeking more than traditional investment routes. It indicates a meaningful shift toward thoughtful, well-researched strategies for a long-term wealth source.

Strong Research and Quality Selection Filters

Curated platforms like the PMS AIF WORLD apply multidimensional evaluation frameworks, such as assessing the People, Philosophy, Performance, Portfolio, and Pricing elements of every PMS strategy to help investors choose quality managers.

Tools now enable richer comparisons, risk analysis, and peer benchmarking, allowing investors to compare PMS returns beyond superficial CAGR rankings.

The Risk Perspective: Critical Factors Investors Must Recognise

Higher Entry Barriers and Liquidity Considerations

Minimum investment requirements, commonly around ₹50 lakh, keep PMS primarily accessible to high-net-worth investors. 

Also, liquidity is more limited compared to mutual funds due to exit terms, concentrated exposure, and operational processing timelines. These factors require investors to adopt a longer-term view.

Higher Volatility and Drawdown Risk

High conviction portfolios have the potential to deliver strong outperformance during rising markets, but they can also face sharper declines during corrections, particularly when they carry higher exposure to small and mid caps.

Recent performance data shows a noticeable gap in returns across PMS strategies. While some have generated strong gains during rising markets, others have struggled to keep up. 

The spread in outcomes underlines why investors must closely analyse a manager’s strategy, risk discipline, and how the portfolio is allocated in varying market conditions.

Fee Structure and Impact on Net Returns

PMS generally involves both fixed management fees or performance-linked charges, meaning that fee drag must be carefully evaluated. 

The quality of returns, consistency across cycles, and risk-adjusted outcomes such as Sharpe ratio, volatility measures, and maximum drawdowns are therefore more meaningful than headline CAGR numbers.

Taxation and Portfolio Transparency

Since securities are held directly in the investor’s name, standard equity capital gains taxation rules apply, and turnover can influence tax incidence. 

Portfolio disclosure frequency may be lower relative to mutual funds, making trust in the manager’s governance framework and research rigor crucial.

Behavioural and Concentration-Based Risks

Overconfidence, momentum-driven investing, or choosing a PMS solely based on recent performance can lead to misaligned decisions. 

A concentrated error can have a significant impact on returns, which is why process discipline, rather than chasing performance, forms the foundation of successful PMS investing.

So, what are the key takeaways?

PMS services in India offer a compelling proposition for investors who seek customised portfolios, targeted market participation, and the potential for superior long-term returns. However, there are certain risk factors that should be carefully evaluated before investing.

Key Advantages

  • Higher potential returns compared to traditional investments
  • Portfolios tailored to an investor’s risk profile and goals
  • Managed by experts using research-driven strategies
  • Access to the growing alternative investment space

Key Risks

  • High minimum investment and limited liquidity can restrict flexibility for investors.
  • Greater market and concentration risk due to focused portfolios
  • Fees can reduce net returns, especially when performance-linked charges apply
  • Performance depends heavily on the manager’s skill, strategy, and investment philosophy

Wrapping Up

In a fast-moving equity market, PMS can offer HNIs and experienced investors a real opportunity to grow their wealth, provided they are willing to take measured risks. 

With support from a disciplined, research-driven advisory platform like PMS AIF WORLD, investors can approach the PMS and AIF space with confidence and build portfolios designed to perform over the long term.