Yet, despite their premium positioning, the past few quarters have seen significant investor outflows from PMS strategies. What went wrong? Why are investors pulling back from what was once a high-growth investment segment?
In this blog, we explore the underlying causes of this dip in investor confidence, how portfolio management companies in India are responding, and what this means for investors.
Understanding PMS And Its Appeal
Unlike mutual funds where money is pooled, PMS provides each investor with a dedicated portfolio tailored to their risk appetite and goals. Some key features that made PMS attractive include:
● Customisation: Investment plans aligned with individual goals.
● Transparency: Direct ownership of stocks and securities.
● Potential for Higher Returns: Managers can take concentrated positions.
● Prestige Factor: Long considered an HNI-exclusive product.
However, as markets evolve and investor awareness increases, these strengths are now being re-examined.
Recent Outflows From PMS – The Numbers
According to SEBI’s 2023–24 data, PMS assets under management (AUM) touched an all-time high of over ₹32 lakh crore. Yet, inflows have been uneven.
● Client numbers have stagnated, failing to recover fully post-COVID.
● Quarterly data shows selective outflows in strategies that underperformed benchmarks.
● PMS companies with aggressive bets in mid- and small-caps saw sharper redemptions compared to conservative strategies.
This suggests that while PMS remains a large industry, investor faith in certain strategies has weakened.
What Is Driving The Loss Of Confidence?
1. Performance Gaps vs Benchmarks
Several PMS funds failed to beat indices consistently. While top performers delivered alpha, many lagged behind mutual funds, creating dissatisfaction.
2. High Costs and Fee Structures
PMS fees typically include management fees (1.5–2.5%) and profit-sharing. In a low- return environment, these costs erode investor gains, leading to comparisons with lower-cost mutual funds.
3. Market Volatility
The sharp swings in 2022–24, especially in mid-cap and small-cap segments, exposed PMS strategies with concentrated bets. Investors preferring stability began moving towards safer instruments in 2025 or 2026.
4. Transparency And Reporting Concerns
Despite SEBI’s regulations, investors feel reporting in PMS is less frequent and harder to interpret than in mutual funds. This lack of clarity impacts trust.
5. Rising Competition From Alternatives
Products like AIFs (Alternative Investment Funds), passive ETFs, and even global investing platforms have attracted HNIs seeking diversification.
The Bigger Picture – Shifting Investor Behaviour
Investor psychology has evolved. Earlier, PMS appealed to those chasing exclusivity and higher alpha. Today, investors are more cautious, preferring:
● Cost-efficiency over prestige.
● Liquidity and transparency over concentrated high-risk bets.
● Diversification across asset classes.
This behavioural shift is a big reason for recent PMS outflows.
How Portfolio Management Companies In India Are Responding
Leading PMS providers are:
● Tweaking strategies towards more balanced allocations instead of extreme bets.
● Lowering fee structures or offering performance-linked models.
● Enhancing digital dashboards for transparency.
● Diversifying offerings by launching hybrid PMS-AIF models.
However, rebuilding trust will take time and consistent performance.
The Dezerv Perspective
At Dezerv, we believe investor trust is built on:
● Transparency: Simple, jargon-free reporting.
● Evidence-based strategies: Focus on risk-adjusted returns rather than chasing headlines.
● Access: Helping investors understand the trade-offs of PMS versus mutual funds or AIFs.
By keeping client-first principles at the core, portfolio management can still play a valuable role in a high net-worth investor’s wealth journey.
Frequently Asked Questions (FAQ)
Q1. Why are investors pulling out of PMS now?
Outflows are driven by underperformance of certain strategies, high costs, and a shift in investor preference towards more transparent and cost-effective products.
Q2. Is PMS still better than mutual funds?
Not always. While PMS offers customisation and flexibility, mutual funds often outperform after adjusting for costs. The right choice depends on your portfolio size, risk appetite, and goals.
Q3. What is the minimum investment in PMS?
In India, the SEBI-mandated minimum is ₹50 lakh. Q4. Are PMS fees justified? Fees can be worthwhile if a PMS consistently beats benchmarks net of costs. However, many investors are questioning whether this value is being delivered.
Q5. Should I consider PMS in 2025?
Yes, if you have a significant corpus, a high-risk appetite, and prefer personalised strategies. Otherwise, diversified mutual funds or AIFs might be more efficient.
Conclusion
The recent outflows from PMS highlight a trust and performance gap. While portfolio management companies in India are adapting, investors are demanding more value for the high fees charged.
For investors, the key takeaway is this: Evaluate PMS not by prestige, but by alignment with your goals, costs, and risk tolerance.
At Dezerv, our approach is to help you cut through the noise, focus on evidence, and craft strategies that protect and grow your wealth sustainably.
