For most of India’s investing history, the products on offer were built for the average investor, not the individual one. A fixed deposit, an insurance plan, a mutual fund scheme: each was designed to serve thousands of people at once, on the reasonable assumption that their needs looked broadly alike. For decades, that assumption held.
It holds less well today. As private wealth in India has grown, it has also grown lumpy and specific. A founder may carry most of her net worth in a single stock. A senior professional may have ESOPs vesting in tranches over several years. A retiree may need income drawn down in a particular sequence to manage tax. These are not variations on one problem that a single pooled scheme can solve. They are different problems that call for different portfolios.
This is the shift behind the growing interest in customised investing through PMS (Portfolio Management Services) in India: a move away from standardised products towards portfolios shaped around one balance sheet. The question worth asking is why it is happening now, rather than a decade ago. The answer lies partly in how Indian wealth itself has changed, and partly in how the rules governing PMS were rebuilt in 2020.
What PMS Actually Is
PMS is a SEBI-regulated service where a portfolio manager runs a portfolio held directly in the investor’s own name, above a regulatory minimum of ₹50 lakh per client.
Two distinctions matter before going further:
- Discretionary PMS: the manager makes and executes decisions within the agreed mandate. Under SEBI rules, discretionary portfolios may invest only in listed securities, money market instruments, units of mutual funds, and similar specified instruments — not unlisted paper.
- Non-discretionary PMS: the manager advises, but the client approves each transaction, and the permitted universe is wider.
In addition there is a bifurcation based on asset classes invested:
Equity/direct-stock PMS vs fund-based PMS: both operate under the same SEBI framework. PMS is often assumed to mean direct stock-picking alone; fund-based mandates, constructed around mutual fund units, are equally valid. The wrapper is the same regulated structure; what differs is what sits inside it.
How Indian Wealth Management Got Here
The shift towards customisation is not a sudden trend. It is the latest stage in a long sequence:
- The savings era — Wealth was concentrated in gold, property, fixed deposits, and insurance-as-investment. Standardised products were adequate when goals were linear and balance sheets were simple.
- Mutual fund democratisation — Pooled, professionally managed investing reached a far wider base. AMFI data shows industry AUM has grown roughly sixfold over the decade, from around ₹13.82 lakh crore in May 2016 to approximately ₹81.58 lakh crore in May 2026. This was the right structure for the mass market, and remains so.
- The distribution era — affluent investors were served largely through product distribution. The incentive was to sell the next product, not to build one coherent portfolio around a single balance sheet. That gap is precisely where the affluent were underserved.
- PMS and AIFs arrive for the affluent — SEBI first framed PMS rules in 1993 with a ₹5 lakh minimum, raised to ₹25 lakh in 2012. The decisive change was the SEBI (Portfolio Managers) Regulations, 2020.
- Today — separately managed portfolios are now both feasible to monitor and easier to hold accountable than at any prior point.
What the 2020 Overhaul Actually Changed
The 2020 regulations are the regulatory inflection point, here’s why:
- Minimum investment doubled from ₹25 lakh to ₹50 lakh, repositioning PMS firmly as an affluent-investor product rather than a mass one.
- Manager net worth requirement rose from ₹2 crore to ₹5 crore, deterring undercapitalised operators.
- Upfront fees were banned. Fees must be charged on a fixed, performance-linked, or combined basis as agreed — but never upfront, removing a long-standing mis-selling incentive.
- Performance reporting was standardised on the time-weighted rate of return (TWRR) method, net of fees, so that an investor’s reported return is genuinely comparable to a benchmark rather than flattered by the timing of cash flows.
- Existing investors were grandfathered, so the higher minimum applied prospectively.
The point is not the numbers themselves. It is that customisation became safe to choose only once disclosure and reporting standards matured enough to make a separate, opaque-by-default account legible.
Why Pooled Products Reach Their Limits at HNI Scale
- PMS securities sit in the investor’s own demat account, not in a vehicle pooled with thousands of others. There is no unitisation layer between the investor and the holdings.
- Inherited tax baggage in pooled funds. A new mutual fund investor effectively buys into the fund’s embedded unrealised gains; when the fund books them, the consequences are socialised across all unitholders. A separate account carries no such inherited baggage.
- But direct ownership cuts both ways. In PMS, every trade the manager makes is a taxable event for that investor directly, whereas a mutual fund’s internal churn does not trigger tax until the investor redeems. PMS removes the deferral cushion. Whether this nets out positively depends on the investor’s tax position and the mandate’s turnover.
- Tailoring within a mandate. A separate account can be built around an investor’s existing concentrated holdings declining to add more of a stock they are already heavy in, or sequencing around an ESOP vesting schedule in a way a single pooled scheme built for a broad base cannot.
- Position-level visibility into what is held, and why, is easier in a separate account than in a pooled one reported monthly in aggregate.
What Made This Credible
Customisation is only worth choosing if it can be verified. Two developments made that possible:
- The Association of Portfolio Managers in India, incorporated in December 2021 and operational from May 2022, is the SEBI-recognised industry association for registered portfolio managers — broadly analogous to AMFI’s role for mutual funds, though an industry body rather than a statutory regulator.
- The Disclosure Document. Every PMS relationship is anchored in a SEBI-mandated Disclosure Document and client agreement, setting out the mandate, fee basis, risk factors, and past performance. SEBI does not approve the strategy itself; the investor must read these and decide.
Why Now
- Regulatory maturity — a framework now transparent and accountable enough to make separate accounts legible.
- Wealth complexity — multiple income sources, founder and ESOP equity, concentrated single-stock positions, and multi-generational goals. RBI data shows Indian households’ financial assets have grown substantially over the past decade, even as significant holdings remain in physical assets like property and gold.
- Digital reporting — separate portfolios that were once burdensome to monitor are now tracked as easily as a mutual fund statement.
- The performance context, stated honestly. Per the SPIVA India Mid-Year 2025 Scorecard, 73% of active large-cap Indian equity funds underperformed their benchmark over the 10 years to June 2025, with wide dispersion between top- and bottom-quartile funds — meaning fund selection itself carries real risk. None of this implies PMS mandates outperform but there needs to be significant time and research that should go into creating a portfolio which the modern work-life doesn’t make concessions for.
What “Customised” Means
In practice, customisation in PMS usually means:
- A separate account, held in the investor’s own name
- Position-level transparency into individual holdings
- Tax-lot level control over when gains and losses are realised
- Tailoring within the manager’s stated mandate
It doesn’t mean a fully bespoke portfolio designed from scratch for each client. The degree of personalisation varies materially by provider and mandate which is the reason to evaluate carefully, not a reason to dismiss the category.
How to Evaluate a PMS Mandate
- Is the mandate clearly and narrowly defined in the Disclosure Document, or vaguely worded?
- Does reporting show genuine position-level detail, or only summary returns?
- How does the manager propose to handle your existing concentrated holdings?
- Is the track record consistent across multiple market cycles, not a single strong year?
Conclusion
The case for customised PMS rests on two things happening at once: private wealth in India has grown more concentrated and specific than standardised products were built for, and the 2020 regulatory overhaul gave investors a way to actually verify what a separate portfolio is doing, not just take a manager’s word for it. Neither condition alone would have been enough. Complexity without verification is just risk; verification without complexity is a solution looking for a problem.
What this means in practice is that the case for PMS strengthens with the size and complexity of the portfolio it serves, not simply with the size of the cheque written. An investor who barely clears the ₹50 lakh threshold but holds a simple, diversified portfolio may have little to gain from customisation. An investor with concentrated stock, vesting equity, or multi-generational goals has a strong reason reason to want it.
Frequently Asked Questions
Does customised PMS mean a portfolio built only for me?
Usually not literally. It typically means a separate account in your name, tailored within the manager’s stated mandate, not a portfolio designed from scratch for one person.
If I hold concentrated stock or ESOPs, how is PMS different from a pooled fund?
A separate account has full visibility into your holdings and can be built or adjusted around them. A pooled mutual fund has no view of any individual investor’s other positions and cannot tailor around them.
Does moving towards PMS mean leaving mutual funds behind?
No. The two commonly coexist within the same investor’s broader portfolio.
How do I verify a PMS provider is SEBI-registered?
Check the provider’s Disclosure Document and SEBI’s public register of registered portfolio managers before evaluating any mandate.
