PMS vs mutual funds: How have portfolio managers fared on returns?

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Subscribe to enjoy similar stories. Portfolio management schemes (PMS) are intended to outperform the market and the investment vehicle for the public at large—mutual funds. But in the past five years, PMS have, as a set, trailed mutual funds in beating market benchmarks.

PMS are offered by registered investment firms and mutual funds, with a minimum investment limit of ₹50 lakh. Since they allow for greater customisation, flexibility and dynamism, they offer the possibility of higher returns. However, an analysis of their regulatory filings shows this hasn’t been the case in five years to December 2024.

There was a time when PMS matched mutual funds on assets under management (AUMs). In March 2014, mutual fund AUMs exceeded those of PMS by only 7%. Both sets have seen their AUMs grow briskly since.

But the faster growth of mutual funds (average of 21% per year versus 16% for PMS) has seen that gap progressively widen. As of December 2024, mutual fund AUMs were 81% higher than PMS. Also read | The week in charts: Market rout, salary hikes, Delhi earthquake Data from the market regulator shows there were 364 portfolio managers in December 2024, managing ₹37.1 trillion for about 193,000 clients.

Performance data, along with benchmarks, is available for 1,248 investment plans covering about ₹4.4 trillion in assets. In the equity space, the outperformance of PMS compares well with that of mutual funds. About 62% of plans beat their corresponding benchmark, against 64% for direct plans of mutual funds.