PMS Portfolio Management Service PMS India SEBI Portfolio Manager Regulations Discretionary PMS Non-discretionary PMS HNI investing

Portfolio Management Service in India

From WebNotes, a public knowledge base. Last updated 17 May 2026. Reading time ~17 min.

A Portfolio Management Service (PMS) in India is a SEBI-regulated investment-management vehicle through which a SEBI-registered Portfolio Manager manages individual client portfolios under a defined mandate. PMS is the principal vehicle for high-net-worth investors seeking customised investment management beyond what mutual fund schemes provide. Governed by the SEBI (Portfolio Managers) Regulations, 1993 (with multiple subsequent amendments), the PMS framework distinguishes between discretionary PMS (the portfolio manager has full investment discretion) and non-discretionary PMS (the manager requires client approval for each transaction). The minimum-investment threshold, raised progressively by SEBI over decades, stands at Rs 50 lakh as of 2026, positioning PMS as a high-net-worth-investor product distinct from mutual fund schemes that are open at much lower minimums (Rs 100 to Rs 5,000).

The Indian PMS industry’s growth from the 1990s through the 2020s has been substantial. From a handful of operators serving a small client base, the industry has expanded to over 350 SEBI-registered Portfolio Managers managing an aggregate corpus exceeding Rs 30 lakh crore as of 2025 (across discretionary, non-discretionary, and advisory categories). PPFAS Ltd’s Cognito PMS , launched in October 1996, is one of the longest-tenure Indian discretionary PMS operations, having served as the strategic predecessor to PPFAS Mutual Fund .

PMS competes with alternative investment funds (AIFs) and mutual funds in the broader Indian investment-vehicle landscape. PMS’s distinctive features are customisation and discretionary-mandate flexibility, but the per-client-portfolio operational model creates structural scaling limits relative to MFs.

Origin and regulatory framework

Pre-1993 informal advisory practice

Before the SEBI PMS Regulations, the Indian investment-management landscape operated largely through:

Broking and advisory firms: Operating informal portfolio-advisory relationships with high-net-worth clients.
Trust-based portfolio management: Through bank trustee departments and family trusts.
Mutual funds: The Unit Trust of India (UTI) since 1963; private MFs after 1993.

These arrangements operated without specific regulatory categorisation, creating concerns about operational standards, conflicts of interest, and investor protection.

SEBI Portfolio Managers Regulations 1993

The SEBI (Portfolio Managers) Regulations, 1993 were enacted to formalise the PMS framework. Key provisions:

Section 3: Mandatory SEBI registration for any entity offering Portfolio Management Services.
Section 6: Capital adequacy requirements for Portfolio Managers (initially Rs 50 lakh net worth, later raised to Rs 5 crore).
Section 14: Code of conduct for Portfolio Managers.
Section 16: Inspection and disciplinary framework.
Specific definitions: Discretionary PMS, non-discretionary PMS, advisory services.

The Regulations established the framework that has governed Indian PMS operation for over three decades, with periodic amendments addressing market evolution.

2020 SEBI Amendment

The most substantive recent amendment was the SEBI (Portfolio Managers) Regulations, 2020, which:

Raised the minimum investment to Rs 50 lakh (from the prior Rs 25 lakh, originally Rs 5 lakh).
Raised the Portfolio Manager net-worth requirement to Rs 5 crore.
Introduced standardised performance-disclosure requirements.
Reformed the fee-structure framework with a maximum performance fee.
Strengthened the disclosure-document requirements.

These changes positioned PMS more firmly as a high-net-worth product while improving investor-protection standards.

PMS categorisation

Discretionary PMS

In a discretionary PMS, the Portfolio Manager has full discretion to make investment decisions on behalf of the client without requiring per-transaction approval. Features:

Investment flexibility: Manager can buy and sell freely within the agreed mandate.
Faster execution: No back-and-forth approval delays.
Manager accountability: All decisions are the manager’s responsibility within the SEBI-prescribed Code of Conduct.

Discretionary PMS is the dominant category in the Indian market, representing approximately 70-80 per cent of total PMS AUM.

Examples of discretionary PMS strategies:

Value-investing PMS: Such as Cognito PMS operated by PPFAS Ltd, applying value-investing-and-behavioural-finance principles.
Growth-equity PMS: Targeting high-growth Indian equities.
Multi-cap PMS: Diversifying across market capitalisations.
Thematic PMS: Specific themes such as consumer staples, technology, financials.

Non-discretionary PMS

In a non-discretionary PMS, the Portfolio Manager provides investment recommendations but requires the client’s specific approval before executing each transaction. Features:

Client retains decision authority: Each transaction explicitly approved.
Greater client involvement: Time-consuming but suitable for clients who want active participation.
Manager role is advisory-plus-execution: Recommendation and execution but not autonomous decision-making.

Non-discretionary PMS is a smaller category, suited to ultra-high-net-worth investors with specific governance preferences.

Advisory PMS

In advisory PMS, the Portfolio Manager provides investment advice but does not execute transactions. The client executes through their own brokerage account. Features:

Advice-only mandate: Manager recommendations; client execution.
Lower fees compared to discretionary or non-discretionary.
Greater client operational involvement.

Advisory PMS is typically used by family offices and institutional clients with existing execution infrastructure.

Operational framework

Client onboarding

PMS client onboarding involves:

Investor agreement: Formal contract between client and Portfolio Manager.
Disclosure document: SEBI-prescribed document outlining strategy, performance, fees.
KYC verification: Through SEBI KRA network.
Minimum investment: Rs 50 lakh deposit (2020 framework).
Mandate specification: Investment strategy, risk profile, custodian.

The onboarding is typically more involved than mutual fund subscription, reflecting the customised nature of PMS.

Portfolio structure

Unlike mutual fund schemes (which pool investor capital), each PMS client has a dedicated portfolio in their name:

Securities held individually: Each client’s holdings are separately identified.
Custodian relationship: Securities held by a custodian under the client’s name (typically a SEBI-registered custodian).
No co-mingling: Distinct from MF unit-holder pooling.

This per-client structure enables customisation but limits operational scale.

Investment management

The Portfolio Manager:

Constructs the portfolio: Per the agreed mandate.
Monitors and rebalances: Based on market conditions and strategy.
Manages risk: Within the defined risk parameters.
Reports periodically: Per SEBI disclosure requirements.

Discretionary PMS managers typically construct portfolios of 20-40 holdings, similar to the focused-portfolio approach common in value-investing-oriented PMS.

Fee structure

PMS fee structures typically include:

Management fee: Annual percentage of AUM, commonly 1.5 per cent to 2.5 per cent.
Performance fee: Percentage of returns above a defined hurdle rate. SEBI 2020 framework caps performance fee at 20 per cent of profits above a hurdle.
Custodian and operational expenses: Pass-through.
Entry and exit loads: Where applicable.

The total expense ratio for PMS is typically higher than direct-plan mutual funds but provides customisation in return.

Reporting and compliance

PMS reporting obligations:

Monthly statements: To client.
Quarterly portfolio disclosure: To SEBI.
Annual audited financial statements.
Compliance with SEBI Code of Conduct.

These reports are typically client-confidential rather than public, distinguishing PMS from mutual funds (where periodic disclosures are public).

Tax framework

Capital gains

Each PMS investor is treated as the direct owner of the underlying securities. Capital-gains computation:

Section 112A: Long-term capital gains on equity-oriented holdings held over 12 months at 12.5 per cent above Rs 1.25 lakh annual exemption (post Finance Act 2024).
Section 111A: Short-term capital gains on equity-oriented holdings held under 12 months at 20 per cent (post Finance Act 2024).
Slab rate: For debt-oriented holdings (post Finance Act 2023).

The tax framework parallels direct-equity investing rather than mutual fund unitholder taxation.

TDS framework

Unlike mutual funds (where TDS is at the fund-level for non-residents and dividends), PMS direct-securities-holding investors generally have TDS applied at the broker or company level (e.g., dividend TDS under Section 194 for direct equity).

Cost-basis tracking

Each PMS investor must track their own cost basis across all PMS-managed transactions. The Portfolio Manager provides cost-basis statements; the investor uses these for ITR preparation.

Comparison with other investment vehicles

PMS versus mutual funds

Attribute	PMS	Mutual Fund
Minimum investment	Rs 50 lakh	Rs 100 to Rs 5,000
Customisation	High (per-client portfolio)	Low (standardised schemes)
Tax framework	Direct-securities ownership	Unit-holder framework
Reporting	Client-confidential	Public NAV and portfolio disclosure
Operational scale	Limited (per-client overhead)	High (pooled AUM)
Fee structure	Management plus performance	Management (TER) only typically
Liquidity	Defined exit terms; typically not real-time	Real-time at NAV cut-off

PMS versus AIFs

Attribute	PMS	AIF
Categorisation	One framework	Three categories (I, II, III)
Customisation	High	Pooled but more customised than MF
Minimum investment	Rs 50 lakh	Rs 1 crore (Category I and II); Rs 1 crore (Category III)
Investor base	HNIs	Sophisticated and institutional
Use cases	Customised equity and balanced strategies	Private equity, hedge funds, venture capital

PMS versus Registered Investment Advisor

Attribute	PMS	RIA
Mandate	Investment management	Investment advice
Discretion	Yes (in discretionary PMS)	No (advisory only)
Client custody	Manager-arranged custodian	Client retains custody
Fee structure	Management plus performance	Fee-only advisory typically

Notable Indian PMS operators

Large institutional PMS providers

Bank-sponsored PMS: HDFC, ICICI, Kotak, SBI, Axis (each with PMS arms).
Broker-sponsored PMS: Motilal Oswal, Edelweiss, IIFL, ASK Investment Managers.
Independent boutique PMS: Various, including specialised value-investing firms.

Notable value-investing-oriented PMS

Cognito PMS (PPFAS Ltd, 1996): One of the earliest discretionary value-investing PMS in India; closed to new clients for over a decade as PPFAS Ltd focuses on the mutual fund AMC. Strategic predecessor to PPFAS Mutual Fund schemes.
Marcellus Investment Managers (founded 2018 by Saurabh Mukherjea): Quality-focused growth PMS.
PPFAS-aligned value-investing PMS other than Cognito (various boutique firms).
Quest Investment Advisors: Value-investing-and-quality-focused PMS.

Other major operators

Edelweiss Wealth PMS.
HDFC Securities PMS.
Kotak Securities PMS.
ICICI Securities PMS.
Motilal Oswal PMS.

The industry has approximately 350+ SEBI-registered Portfolio Managers as of 2026.

Industry growth and trends

Historical growth

1993-2000: Early-formal years post-Regulations; small AUM base.
2000-2010: Growth driven by rising HNI wealth and Indian equity returns.
2010-2020: Substantial expansion; emergence of boutique PMS firms.
2020-2025: Continued growth despite Rs 50 lakh minimum-investment raise; increased competition with AIFs and direct-equity investing.

Aggregate Indian PMS AUM exceeded Rs 30 lakh crore by late 2025.

Industry consolidation

The PMS industry is fragmented relative to mutual funds:

Top 10 PMS providers account for approximately 40-50 per cent of AUM.
Long tail of 300+ smaller firms.
Some boutique firms have transitioned to mutual fund AMC structures (similar to PPFAS Ltd’s transition from Cognito PMS focus to PPFAS Mutual Fund focus).

Recent regulatory developments

2020 minimum-investment raise to Rs 50 lakh: Reduced retail-investor accessibility but tightened HNI focus.
Performance-fee cap (2020): Standardised the maximum performance fee structure.
Disclosure-document standardisation: Improved investor transparency.
Direct-plan introduction: For investors approaching PMS without distributor mediation.

Emerging Specialised Investment Funds

SEBI’s Specialised Investment Funds (SIF) category, introduced in 2024, may offer a regulatory bridge between mutual fund and PMS structures. SIF allows pooled investment with more strategy flexibility than mutual funds but at lower minimum-investment thresholds than PMS. The category’s evolution is an ongoing industry development.

Criticism and debates

Minimum-investment-raise debate

The progressive increase from Rs 5 lakh (1993) to Rs 25 lakh (2012) to Rs 50 lakh (2020) has been debated:

For: Limits PMS to HNIs who can bear customised-service costs and have appropriate risk-tolerance.
Against: Excludes affluent retail investors who could benefit from PMS-style customisation.

Performance versus mutual fund

PMS performance varies widely; not all PMS outperform comparable mutual fund schemes after fees. Specific concerns:

Higher fees: PMS fees (management plus performance) exceed direct-plan MF fees.
Strategy persistence: Some PMS managers have demonstrated long-term outperformance; others have not.
Customisation premium: Whether the customisation justifies the fee premium varies by client.

Operational transparency

PMS’s confidential per-client framework limits external comparability:

Public-NAV equivalent absent: Unlike MFs, PMS performance is not publicly NAV-quoted.
Strategy-level performance disclosure: SEBI’s 2020 framework improved this; some asymmetry remains.

Distributor-mediated mis-selling

Some PMS sales practices have raised concerns:

Inappropriate scheme recommendation for client risk profiles.
Front-loaded fees without commensurate value.
Conflict of interest between distributor and client.

The SEBI 2020 framework addresses some of these concerns through disclosure-strengthening.

External references

References

SEBI (Portfolio Managers) Regulations, 1993, with subsequent amendments through 2020.
SEBI Master Circular for Portfolio Managers.
SEBI Circular on Performance Fee Structure for Portfolio Managers (2020).
SEBI Circular on Minimum Investment Threshold for PMS (2020).
SEBI (Mutual Funds) Regulations, 1996.
SEBI (Alternative Investment Funds) Regulations, 2012.
SEBI (Investment Advisers) Regulations, 2013.
Association of Portfolio Managers in India (APMI) industry data and reports.
PPFAS Ltd corporate documents covering Cognito PMS.
AMFI Industry Best Practices Guidelines.
Finance Act, 2024 (capital-gains framework).
Finance Act, 2023 (debt-MF taxation amendment).
Income Tax Act, 1961, capital-gains computation framework.
CFA Institute Standards on Investment Performance Reporting.
Indian press archive of PMS industry coverage (Economic Times, Business Standard, Mint).

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 17 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.