Products

Portfolio Management Services (PMS)

A portfolio built for you, not for the average investor

Bespoke · Actively Managed

Portfolio Management Services (PMS)

Portfolio Management Services is a professional solution where experts manage a customised portfolio aligned to your goals and risk profile, aiming for long-term returns. It offers personalised strategies and active management to optimise performance.

In a PMS, securities are held in your own demat account — you see every holding and every transaction. That transparency, combined with a concentrated, high-conviction portfolio, is what separates PMS from pooled products.

We match you with managers whose philosophy actually fits your temperament: some run concentrated quality portfolios, others follow value or special-situations mandates. The right fit matters more than last year's chart-topper.

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Illustrative growth
₹50 Lakh Minimum
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Minimum
₹50 Lakh
Ownership
Own Demat A/c
Expenses Cap
0.5% p.a.
Exit Load
3 / 2 / 1%
Risk ProfileHigh
The basics

What is Portfolio Management Services?

A professionally managed portfolio built for you individually, where the securities are held in your own name, in your own demat account. Nothing is pooled. The minimum investment is ₹50 lakh, set by SEBI.

That single structural fact drives most of the differences from a mutual fund. You own the shares rather than units in a scheme, so you can see every holding, every transaction is yours, and the tax consequences arise in your hands as the manager buys and sells.

In plain terms: a mutual fund gives you a slice of someone else’s portfolio. A PMS gives you a portfolio.

What a PMS actually gives you

  • Securities held in your own demat account, in your name
  • A concentrated portfolio built around a stated approach
  • Full visibility of every holding and every transaction
  • Fee structures that can be negotiated at larger portfolio sizes
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The rules

What SEBI actually requires

Portfolio management in India is governed by the SEBI (Portfolio Managers) Regulations, 2020, which set the minimum, cap the costs and limit what can be charged on exit.

₹50 L
Minimum per client
0.5%
Cap on operating expenses
3 / 2 / 1%
Exit load ceiling
Your name
How securities are held

Minimum per client — ₹50 L

The minimum investment per client, raised to this level in 2020. It may be met in cash or by transferring an existing portfolio of securities. Accredited investors are exempt from the minimum.

Cap on operating expenses — 0.5%

Operating expenses charged over and above the management fee cannot exceed 0.5% per annum of the client’s average daily assets under management, excluding brokerage. This is a hard regulatory ceiling.

Exit load ceiling — 3 / 2 / 1%

On partial or full withdrawal, the exit load cannot exceed 3% of the amount withdrawn in the first year, 2% in the second and 1% in the third. Nothing may be charged after three years from the date of investment.

How securities are held — Your name

A separate demat account and bank account are maintained for each client. There is no pooling of investor money, which is the structural difference from a mutual fund or an AIF.

Source: SEBI (Portfolio Managers) Regulations, 2020 and related circulars. SEBI has signalled a broader review of the PMS framework, so confirm the current position before you commit.

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Three arrangements

Who makes the decisions

The label matters, because it determines whether you are delegating judgement or buying it.

Discretionary PMS

The portfolio manager makes and executes every investment decision within the approach and risk profile agreed with you. You receive reporting rather than requests for approval. This is what most PMS investors hold, and it is the arrangement that most resembles handing over a mandate.

The manager decides

Non-discretionary PMS

The manager researches and recommends; you approve before anything is executed. It preserves control at the cost of speed, and it only works if you are reliably available to respond. A missed call is a missed trade.

You approve each trade

Advisory PMS

The manager provides research and recommendations and you retain full control over both the decision and the execution. Suitable where you have your own broking arrangements and want the research rather than the administration.

You execute
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By mandate

The strategy families on offer

Equity

The largest part of the market, spanning large-cap, multi-cap, mid- and small-cap, thematic and sectoral mandates. Portfolios are usually concentrated — often fifteen to thirty holdings — which is the source of both the potential outperformance and the risk.

Debt-oriented

Focused on income and capital preservation through bonds and money-market instruments. A smaller part of the PMS market, since the minimum ticket sits awkwardly against the return profile for many investors.

Hybrid

A blend of equity and debt within one mandate, aiming to soften the ride relative to a pure equity portfolio.

Quantitative and rules-based

Portfolios constructed and rebalanced by a defined model rather than by discretionary judgement, with the stated aim of removing emotional bias from entry and exit.

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Side by side

PMS against mutual funds and AIFs

Mutual Fund
PMS
AIF
Minimum
A few hundred rupees
₹50 lakh per client
₹1 crore commitment
What you own
Units in a pooled scheme
The securities themselves, in your own demat account
Units in a pooled fund
Customisation
None — the scheme is the scheme
The approach can be adapted to your constraints and existing holdings
None — one strategy for every investor
Concentration
Regulated diversification limits apply
Typically concentrated, by design
Varies sharply by category and mandate
Costs
A single expense ratio
Management fee, performance fee, operating expenses capped at 0.5%, brokerage and exit load
Management fee, carried interest, set-up and placement costs
Taxed
In your hands on redemption
In your hands, transaction by transaction, as the manager trades
Category I and II pass through; Category III at fund level
Liquidity
Daily, if open-ended
Withdrawal permitted, with an exit load in the first three years
Category I and II close-ended for 3–10 years
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Costs

How a portfolio manager is paid

PMS fee structures vary more than any other product in the Indian market, and the differences compound. Understanding the model matters more than comparing the headline number.

Fixed management fee

A percentage of assets under management, charged whatever happens. Predictable for you and for the manager. At larger portfolio sizes it is frequently negotiable, unlike a mutual fund’s standard expense ratio.

Performance or profit-sharing fee

A share of the gains, charged instead of or alongside a lower fixed fee. It aligns the manager with you in a rising market. What matters is the two provisions that qualify it.

High water mark

The manager can only charge a performance fee on gains above the highest value your portfolio has previously reached. Without it, you can pay a performance fee twice for recovering the same ground. Its presence is not optional under SEBI’s framework — but confirm how it is applied.

Hurdle rate

A threshold return that must be cleared before any performance fee arises. Check whether the fee then applies to the whole gain or only to the excess above the hurdle, because the difference is substantial.

Operating expenses

Custody, fund accounting, audit and administration, capped by SEBI at 0.5% per annum of average daily assets under management, excluding brokerage.

Brokerage and transaction costs

Charged separately and driven by turnover. A high-turnover approach costs more than its fee schedule suggests, and it also accelerates your tax.

Exit load

Capped at 3% of the withdrawal in the first year, 2% in the second and 1% in the third, and nothing thereafter.

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The mechanics

How a PMS relationship starts

1

Risk profiling and approach selection

The conversation begins with what the money is for, the horizon and how much volatility you can genuinely hold through. A concentrated equity portfolio has drawdowns that a diversified fund does not, and that has to be acceptable before anything else happens.

2

The Disclosure Document and the agreement

SEBI requires the portfolio manager to give you a Disclosure Document covering the approach, the risk factors, the fee schedule with illustrations, past performance and any litigation history. The agreement then sets out the mandate. These are the two documents that govern everything that follows.

3

Accounts opened in your name

A demat account and a bank account are opened for you specifically. Your securities sit there, not in a pool.

4

Funding, in cash or in securities

You transfer ₹50 lakh or more in cash, or hand over an existing portfolio of securities to be restructured. The second route needs care, because restructuring realises gains.

5

Investment and reporting

The manager builds the portfolio. You receive periodic reports covering holdings, transactions, valuation and performance, and most managers now provide an online view alongside them.

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Selection

What to check before you commit

The questions that change the outcome, in the order they matter.

Discretionary, non-discretionary and advisory are genuinely different relationships. Non-discretionary sounds attractive to people who like control, and it fails quietly when they are unreachable for three days during a correction. Choose honestly.
SEBI requires portfolio managers to illustrate the effect of fees on returns across scenarios. It is the single most useful page in the document, and it is the one most often skipped.
Management fee, performance fee, operating expenses up to 0.5%, brokerage driven by turnover, and exit load if you leave early. Two managers quoting the same fixed fee can cost very different amounts.
Is there a high water mark, and how is it applied after a withdrawal? Is there a hurdle rate, and does the fee apply to the whole gain once cleared or only to the excess? Is there a catch-up? These provisions are where the money is.
Time-weighted return neutralises the effect of your contributions and withdrawals, which is the right way to judge the manager. It is not what you personally earned — that depends on when you put money in. And gross returns are not net returns. Ask for both, on the same basis.
A PMS portfolio is usually concentrated, which is precisely why it can outperform and precisely why it can fall harder. If a portfolio of twenty stocks down thirty per cent would cause you to abandon the plan, this is not the right product regardless of the manager.
Anyone can look good in a bull market for mid-caps. What matters is how the approach behaved in a drawdown, whether the process stayed consistent when it stopped working, and how long this particular manager has been running this particular strategy.
Because you own the securities, every sale by the manager is a taxable event for you. A high-turnover approach realises short-term gains at 20% along the way, where a buy-and-hold approach defers the liability. That difference is real and it is rarely in the marketing material.
If you hold accreditation, the ₹50 lakh minimum does not apply and the terms available to you can differ. It is worth knowing whether you qualify before assuming the threshold is fixed.
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Be clear-eyed

What can go wrong

A higher minimum does not mean a lower risk. In several respects a PMS carries more risk than the mutual fund it is being compared against.

We would rather set these out plainly now than have you meet them for the first time in a bad quarter. If any of them makes the product unsuitable for you, that is a useful answer and it costs nothing to reach.

Concentration risk

Fifteen to thirty holdings means a single bad position, or a single bad sector call, moves the whole portfolio. Diversification limits that bind a mutual fund do not bind a portfolio manager in the same way.

Manager risk

The outcome depends on the judgement of a specific person following a specific process. A manager change, or a process that drifts, changes the product you bought.

Liquidity and exit cost

You can withdraw, but an exit load applies for up to three years, and a concentrated portfolio in less liquid names can take time to unwind without moving prices.

Tax drag from turnover

Every trade the manager makes is a taxable event in your hands. Turnover that looks like activity can be a meaningful, invisible cost.

Cost drag

A fixed fee, a performance fee, operating expenses and brokerage together set a bar the strategy has to clear before you are ahead of a low-cost index fund.

No daily NAV to anchor you

Mutual fund investors see a single number. PMS investors see every holding move, which is more transparent and, for many people, considerably harder to sit through.

Concentrated small- and mid-cap exposure

Many PMS approaches operate outside the largest companies, where drawdowns are deeper and recoveries slower. That is a horizon question before it is a return question.

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Taxation

How a PMS is taxed

Because the securities are held in your own name, the tax position is the same as if you had bought them yourself. Each sale by the manager is a taxable event for you. On listed equity, short-term capital gains on holdings of twelve months or less are taxed at 20% under section 111A, and long-term gains at 12.5% under section 112A above the ₹1.25 lakh annual exemption. Dividends are added to your income and taxed at your slab rate.

The portfolio manager does not deduct tax at source — you report the gains under “Capital Gains” in your own return and pay the tax yourself. Where turnover is substantial, an audit obligation may arise under section 44AB. Tax rates and thresholds change with each Finance Act and your position depends on your own circumstances; please take advice rather than relying on a general statement.

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Setting it straight

Myths and facts

Commonly believed
What is actually true
A PMS is just a mutual fund with a higher minimum.
You own the securities rather than units, the portfolio is concentrated rather than diversified to a regulated limit, the fee structure is negotiable, and the tax arises transaction by transaction rather than on redemption. Almost nothing about it is the same.
A higher minimum means better returns.
It means a different structure and a different client. There is no mechanism by which a ₹50 lakh minimum produces a better outcome, and plenty of PMS approaches have lagged an index fund after costs.
The return the manager publishes is the return I would have received.
Time-weighted return deliberately strips out the effect of when money went in, so it measures the manager rather than your experience. Your own return depends on your timing. Always establish whether a figure is gross or net of all fees.
There is no exit load on a PMS.
There can be up to 3% in the first year, 2% in the second and 1% in the third. Nothing after three years.
The portfolio manager handles my tax.
No tax is deducted at source. The gains are yours to report and the tax is yours to pay, which also means the record-keeping is yours to keep.
A concentrated portfolio is a riskier version of the same thing.
It is a different thing. Concentration is what makes meaningful outperformance possible and what makes a deep drawdown possible. Both follow from the same decision.
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Plain English

Terms you should know

Discretionary
The manager decides and executes without seeking your approval for each trade.
Non-discretionary
The manager recommends; you approve before execution.
Advisory
The manager advises; you decide and execute.
High water mark
The previous peak value above which a performance fee may be charged.
Hurdle rate
A return threshold that must be cleared before any performance fee arises.
Catch-up
A provision letting the manager take a larger share once the hurdle is cleared.
TWRR
Time-weighted rate of return — measures the manager by removing the effect of your cash flows.
Disclosure Document
The SEBI-mandated document setting out approach, risks, fees and history.
Operating expenses
Custody, accounting, audit and administration, capped at 0.5% per annum.
Accredited investor
An investor certified by an accreditation agency, for whom the minimum does not apply.
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Common questions

Frequently asked questions

₹50 lakh per client, set by SEBI in the Portfolio Managers Regulations, 2020. It can be met in cash or by transferring an existing portfolio of securities. Accredited investors are exempt from the minimum, so it is worth establishing whether you qualify.
Yes. A demat account is opened in your name and the securities sit in it. There is no pooling of investor money. This is the structural difference between a PMS and both a mutual fund and an AIF, and it is what drives the tax treatment.
As if you had bought the securities yourself. Every sale the manager makes is a taxable event in your hands — short-term capital gains at 20% on listed equity held twelve months or less, long-term at 12.5% above the ₹1.25 lakh annual exemption. No tax is deducted at source; you report and pay it.
You can request a partial or full withdrawal, subject to the exit load in the first three years and to the time needed to sell down a concentrated portfolio in an orderly way. It is more liquid than an AIF and less liquid than a mutual fund.
Usually yes. Be aware that the manager will restructure the portfolio to fit the approach, and those sales realise capital gains in your hands. That tax cost should be part of the decision, not a surprise afterwards.
Portfolio managers provide periodic reports covering holdings, transactions, valuation and performance, and most offer an online dashboard alongside. Because the securities are in your own demat account, you can also see the holdings independently — which is a real transparency advantage.
Not inherently, and often not at all. A PMS offers concentration, customisation and ownership; a mutual fund offers lower cost, deferred tax and regulated diversification. Which is better depends entirely on the size of your portfolio, your horizon, your tax position and your tolerance for a concentrated drawdown. We will give you an honest answer for your situation, including when that answer is a mutual fund.
Generally yes, through the NRE or NRO route with a PIS or non-PIS account depending on the arrangement, subject to the portfolio manager’s own policy and to the rules of your country of residence. US and Canadian residents face additional restrictions in practice. This needs checking against your specific situation.
Important. This page is general information about how portfolio management services are regulated in India, not a recommendation of any portfolio manager, approach or product, and not tax advice. It contains no performance data and names no portfolio manager. PMS portfolios are market-linked, typically concentrated, and the capital invested is fully at risk. Fee structures, exit loads, minimum investment terms and approaches vary by portfolio manager — read the Disclosure Document and the portfolio management agreement carefully before investing. SEBI has indicated a wider review of the portfolio management framework; confirm the current position before committing. ILNB Group distributes financial products and is paid a commission or fee, disclosed to you for anything we recommend. Investments in securities markets are subject to market risks; please read all scheme and offer documents carefully before investing.
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