Portfolio Management Services
A comprehensive guide to Portfolio Management Services — the institutional-grade investment vehicle for sophisticated individual capital allocators.
What is Portfolio Management Services?
Portfolio Management Services (PMS) is a professional service offered by SEBI-registered Portfolio Managers to manage the investment portfolio of high-net-worth individuals and institutional investors on a discretionary, non-discretionary, or advisory basis.
Unlike mutual funds where investors own units of a pooled vehicle, PMS investors own the underlying securities directly in their own demat account, enabling a personalised, concentrated investment approach tailored to individual risk-return objectives.
Core Characteristics
Direct Ownership
Securities held in investor's own demat account, not a pooled vehicle.
Personalised Strategy
Investment policy customised to individual risk profile and objectives.
Min ₹50 Lakhs
Minimum investment threshold mandated by SEBI regulations.
SEBI Regulated
Portfolio Managers must be registered with SEBI under PMS Regulations, 2020.
Full Transparency
Detailed reporting on each holding, transaction, and rationale.
Dedicated Manager
A named portfolio manager is responsible for your account.
Types of PMS
Discretionary PMS
The Portfolio Manager exercises full investment discretion on behalf of the client. Buy, sell, and rebalancing decisions are made and executed without requiring prior client approval for each transaction — enabling timely, strategy-driven portfolio management.
- Manager has complete authority over trade execution
- No client sign-off required per transaction
- Fastest and most efficient strategy implementation
- Manager is accountable for all investment decisions
- Most common form of PMS in India
Best For
Investors who prefer to delegate fully and want a hands-off approach with professional mandate execution.
Non-Discretionary PMS
The Portfolio Manager provides investment recommendations and a proposed course of action, but each trade requires explicit client approval before execution. The client remains actively involved in all portfolio decisions, while the manager acts as a research and advisory engine.
- Client approves every buy/sell instruction
- Manager provides detailed rationale for each trade
- Client retains full decision-making authority
- Ideal for involved investors who want oversight
- Slower execution — suitable for low-turnover strategies
Best For
Investors who want professional research and recommendations but wish to retain final control over all transactions.
Advisory PMS
The Portfolio Manager solely provides investment advice and research recommendations. The client evaluates the advice independently and is responsible for executing all trades in their own account. The manager has no transactional authority whatsoever.
- Manager offers research, ideas, and recommendations only
- Client independently evaluates and executes all trades
- Manager has zero transactional authority
- Lowest cost structure — advice fee only
- Maximum client control and self-directed execution
Best For
Sophisticated, self-directed investors who want institutional research but prefer to make and execute all decisions themselves.
At a Glance — Key Differences
| Dimension | Discretionary | Non-Discretionary | Advisory |
|---|---|---|---|
| Trade Execution | Manager | Client (on approval) | Client (self-initiated) |
| Client Involvement | Minimal | High | Full |
| Manager Authority | Full discretion | Recommend only | Advise only |
| Speed of Execution | Fastest | Moderate | Slowest |
| Fee Structure | Fixed + Performance | Fixed + Performance | Advisory fee only |
| SEBI Oversight | PMS Regs 2020 | PMS Regs 2020 | PMS Regs 2020 |
Why Choose PMS?
Concentrated Alpha
High-conviction, concentrated portfolios designed to outperform through selective stock picking rather than broad market exposure.
Risk-Adjusted Returns
Mandates built around your specific risk tolerance, time horizon, and liquidity requirements — not a generic benchmark.
Tax Efficiency
Direct ownership enables strategic tax-loss harvesting and optimisation of long-term vs. short-term capital gains.
Dedicated Access
Relationship with a named portfolio manager who provides regular performance reviews and strategic updates.
How PMS Works
Onboarding
KYC verification, risk profiling, and documentation. Demat and trading accounts are linked to the PMS mandate.
Investment Policy
The Portfolio Manager and client jointly agree on an Investment Policy Statement (IPS) defining objectives, constraints, and benchmarks.
Execution
The Portfolio Manager constructs and manages the portfolio, executing buy/sell decisions within the agreed mandate parameters.
Reporting
Monthly performance reports, transaction statements, and periodic reviews with the assigned portfolio manager.
PMS vs Alternatives
| Feature | PMS | Mutual Funds | AIF (Cat III) |
|---|---|---|---|
| Min Investment | ₹50 Lakhs | ₹500 | ₹1 Crore |
| Ownership | Direct (demat) | Units of pool | Units of pool |
| Customisation | High – bespoke | None | Limited |
| Transparency | Full holding-level | Monthly disclosure | Periodic |
| Leverage | Not allowed | Not allowed | Allowed |
| Regulation | SEBI PMS Regs 2020 | SEBI MF Regs | SEBI AIF Regs |
| Taxation | Investor level | Investor level | Fund level (MMR) |
Taxation Framework
Capital Gains
Long-term capital gains (LTCG) on listed equities held for more than 12 months: 12.5% above the ₹1.25 Lakh exemption. Short-term capital gains (STCG) on listed equities: 20%. Debt instruments: As per income tax slab.
Dividend Income
Dividends received from underlying holdings are credited directly to the investor's bank account and taxed at the investor's applicable income tax slab rate. No TDS if held in a demat account with PAN.
TDS Provisions
Portfolio Managers may deduct TDS on dividend distributions at 10% for resident investors (when applicable). No TDS on capital gains. Form 16A issued for TDS deducted. Annual statement provided by Custodian.
Audit & Reporting
PMS investors with portfolio value above ₹50 Lakhs may be required to disclose in Schedule AL of ITR. Tax audit under Section 44AB applies if business income from trading exceeds thresholds. Portfolio Managers provide detailed capital gains statement for ITR filing.