Tulsian, Asit C Mehta, ICICI Pru, Green Lantern, Sundaram: Here’s how top PMSes delivered alpha to investors

Portfolio Management Services or PMS managers have greater freedom to run concentrated portfolios, although sustained benchmark outperformance has varied across strategies. A bl.portfolio analysis of 554 active PMS strategies shows that category-average returns beat the relevant benchmarks in three of the six equity categories examined over five years. Mid-cap stood out as a challenging segment, as no strategy in the sample managed to surpass the Nifty Midcap 150 TRI. Multi- & Flexi-cap was the standout, with both the category average and about 2 out of 3 strategies in the sample beating the respective benchmark.

The wide gap between category averages and the best-performing managers carries a second message. PMS investing is primarily a manager-selection decision, not merely a choice between large-cap, mid-cap or small-cap strategies. A concentrated portfolio can produce exceptional alpha when the manager is right, but it can magnify stock-specific losses, drawdowns and tax costs when the calls go wrong.

As of June 2026, India had 530 SEBI-registered portfolio managers. The industry served about 2.2 lakh investors and managed ₹8.9 lakh crore (excluding EPFO assets) across discretionary, non-discretionary and advisory portfolios. This is a broad industry figure, covering different client segments and mandates. For individual investors, the entry threshold remains substantial, with the minimum investment in a PMS being ₹50 lakh.

The Association of Portfolio Managers in India (APMI) lists about 1,570 PMS strategies, including active and inactive offerings. This bl.portfolio analysis uses PMSBazaar data covering 554 active model portfolios or primary strategies across 15 categories.

Equity strategies were assessed on five-year returns ended June 30, 2026. Debt, multi-asset, MF-PMS and arbitrage strategies were ranked on three-year returns because only a few offerings in these segments had a five-year track record. Performance is reported using the Time-Weighted Rate of Return (TWRR), which is designed to separate the manager’s investment performance from the timing of client cash flows.

Category averages are calculated using a simple average. The findings should be read as a snapshot of the active strategies represented in the database, not as a census of the entire PMS market. Inactive or discontinued strategies are outside the sample. The number of qualifying strategies also differs across categories. Category labels may reflect a strategy’s mandate even when its current portfolio has moved materially away from that label.

Published performance is net of management fees. Investor-level capital-gains tax is not captured by TWRR.

Before we delve deep into PMS performance, investors should understand three important things.

One, the total cost of investing may go beyond the headline management fee. PMS providers commonly use one of three fee structures: Fixed, performance-linked or hybrid. Fixed annual fees generally range from 0.25 per cent to 2.5 per cent of the portfolio value. A performance-fee structure pays the manager a share of gains above a pre-defined hurdle rate. A hybrid structure combines a fixed charge with an incentive fee.

The quoted fee is not necessarily the investor’s full cost. Brokerage, custody, audit, demat, fund-accounting and other operating charges may also apply, along with GST on applicable fees. Under a performance-fee arrangement, investors should examine the hurdle rate, the high-water-mark provision, catch-up clauses and the conditions under which the fee calculation resets.

Two, portfolio churn can create tax even without a withdrawal. In an equity mutual fund, purchases and sales undertaken within the scheme do not create an immediate tax liability for individual unitholders. Tax generally arises when the investor redeems units. In a PMS, securities are bought and sold in the client’s own account. Portfolio churn can, therefore, crystallise short- or long-term capital gains even when the client has not withdrawn money. Brokerage and transaction charges are also borne at the client-account level. Two strategies reporting similar pre-tax returns can consequently deliver different post-tax outcomes, depending on turnover, the holding period of realised gains and the investor’s own cash-flow pattern.

Three, flexibility creates opportunity and concentration risk. Mutual funds operate within standardised category rules. A large-cap mutual fund, for instance, must invest at least 80 per cent of its assets in the top 100 companies and cannot invest more than 10 per cent of the scheme’s corpus in a single stock. PMS managers have greater freedom to build concentrated portfolios, with some strategies allocating 20-30 per cent to one company and holding only 10-25 stocks. That flexibility can help a skilled manager express high-conviction ideas and avoid benchmark-like portfolios. But it also makes outcomes more dependent on a small number of decisions.