Portfolio Management Services (PMS) — A Complete Guide
A personalised, professionally managed portfolio of securities held directly in your own name — built for High Net-Worth investors who want a customised, transparent approach, from a ₹50 lakh entry.
Portfolio Management Services (PMS) is a SEBI-regulated service in which a qualified portfolio manager builds and manages a portfolio of securities tailored to a single investor. The defining difference from a mutual fund is direct ownership: in a PMS, the securities are held in your own demat account, in your name — you don’t hold units of a pooled fund. This gives you visibility into exactly what you own and the ability to align the strategy to your specific goals and risk profile.
PMS is governed by the SEBI (Portfolio Managers) Regulations, 2020, and is designed for sophisticated investors who can commit a larger amount and want a more concentrated, customised approach than a mutual fund typically offers.
The three types of PMS
Discretionary PMS
The manager makes all the buy and sell decisions for you. You don’t approve each trade. This is the most common type, for people who want it fully handled.
Non-discretionary PMS
The manager suggests investments, but you approve each transaction before it is executed. Suits investors who want expert input while keeping the final call.
Advisory PMS
The manager only provides advice; you execute and own all decisions
How PMS works:onboarding and operation
Risk profiling and agreement
You complete KYC, a risk assessment, and sign a PMS agreement that sets out the mandate, fees, and benchmark.
You give permission
For discretionary PMS, you allow the manager to trade in your account — but the shares stay in your name.
Funding
You bring in cash and/or an existing portfolio of securities (subject to the manager's policy).
Portfolio construction
The manager builds a portfolio per the strategy — often more concentrated (say 15–30 stocks) than a mutual fund.
Reporting
You receive regular, detailed statements showing holdings, transactions, performance, and fees, plus access to an independent custodian's records.
Investor protections built into PMS
To protect investors, SEBI requires portfolio managers to:
- maintain a minimum net worth of ₹5 crore;
- appoint an independent custodian to hold client assets (separating safekeeping from management);
- provide regular, detailed reporting on performance, holdings, and fees, with performance reported on a standardised time-weighted return basis;
- act under a fiduciary duty — legally bound to manage your money in your best interest.
Discretionary PMS managers are largely restricted to listed securities and mutual funds; only non-discretionary or advisory mandates may invest a limited portion (up to 25%) in unlisted securities.
Fees: How PMS managers are paid
PMS fee structures vary and are negotiated upfront. Common models include:
- Fixed fee only — a flat annual percentage of assets (for example, around 2%).
- Performance-linked fee — a lower (or nil) fixed fee plus a share of profits above a hurdle rate, charged only on gains beyond an agreed threshold.
- Hybrid — a combination of a modest fixed fee and a performance fee.
Performance fees are typically charged on a high-water-mark basis, meaning you only pay performance fees on new profits above the highest level your portfolio has previously reached — you are not charged twice for recovering past losses. Always confirm the exact fee schedule, exit load, and any other charges before signing.
Who can invest, and how much
Minimum investment: ₹50 lakh per investor, as mandated by SEBI (raised from ₹25 lakh in 2019).
You can meet it with cash and/or shares.
If you take money out, your portfolio usually can't go below ₹50 lakh.
NRIs can invest, usually through NRE/NRO accounts, following the rules.
How PMS is taxed
Because you directly own the securities, tax is calculated in your hands, just like your own direct equity and debt investments:
- Equity: LTCG (held over 12 months) at 5% above the ₹1.25 lakh annual exemption; STCG (held 12 months or less) at 20%.
- Debt and other assets: taxed according to the rules applicable to those assets and your holding period.
- Each buy and sell in your account is a taxable event, so a high-turnover strategy can increase your tax — review the strategy’s typical turnover.
Confirm your specific position with a tax professional, as rules change with each Budget.
Key risks and things to keep in mind
PMS portfolios are often more concentrated than a mutual fund, which can mean both higher potential returns and sharper falls. Returns are not guaranteed.
Judge a manager through the cycle: look at multi-year and through-correction performance, not just the best three-year window. SEBI itself has cautioned against exaggerated performance claims.
Understand the fee structure in full — fixed vs performance, hurdle rate, high-water mark, and exit load — because fees directly affect net returns.
A multi-year horizon and the ability to ride volatility are important for PMS to work as intended.
Higher minimums mean less diversification across managers unless you have substantial capital.
Frequently asked questions
Do I own the shares in a PMS?
Yes. In a PMS, securities are held directly in your own demat account, in your name. This is a key difference from mutual funds, where you hold units of a pooled fund.
What is the difference between discretionary and non-discretionary PMS?
In discretionary PMS, the manager makes decisions without needing your approval for each trade. In non-discretionary PMS, the manager recommends and you approve each transaction. Advisory PMS only advises; you execute.
Can NRIs invest in PMS?
Yes, typically through NRE/NRO accounts and subject to the applicable regulatory framework.
Talk to us
PMS gives you a personal, see-everything way to invest with an expert — but picking the right manager, plan, and fee setup matters as much as deciding to start. Our team at Sanriya can explain how PMS works and what to look out for.