How to evaluate a PMS: the rules, the fees in rupees and the questions to ask

What a PMS is, and what SEBI's rules say

A portfolio management service (PMS) is a SEBI registered portfolio manager running a portfolio of securities for you. Unlike a mutual fund, there is no pool: the shares sit in a demat account in your name, and every trade, gain and dividend is yours. In a discretionary PMS the manager decides what to buy and sell; in a non discretionary one you approve each trade.

The rules come from the SEBI (Portfolio Managers) Regulations, 2020, and the circulars since:

• Minimum ₹50 lakh per client, raised from ₹25 lakh by the 2020 regulations. It applies to new clients and fresh money.
• Fee rules from SEBI's circular of February 2020: no upfront fees; operating expenses other than brokerage capped at 0.5% a year of average daily assets; exit loads capped at 3% in the first year, 2% in the second and 1% in the third; profit share only on gains above the high water mark.
• A direct option. A PMS must let you join without a distributor, with no charges except statutory ones.
• Benchmarks. From 1 Apr 2023 every investment approach is tagged to one of four strategies (equity, debt, hybrid, multi asset) and reports against one of up to three benchmarks APMI, the industry body, prescribes for it.
• A fee tool. Clients joining from 1 Oct 2024 sign a fee annexure and get a calculator showing the fees over several years.

Test 1: the return, measured the right way

A PMS reports its performance as a time weighted rate of return (TWRR). TWRR removes the effect of money coming in and going out, so it measures the manager, not the clients' timing. Your own experience is a money weighted return, closer to XIRR; the CAGR and XIRR guide explains the difference. Both are useful. When you compare managers, use TWRR; when you judge your own account, use XIRR.

Then three questions:

1. Net of what? Ask for returns after all fees and expenses. A gross figure can be several points a year higher.
2. Against which benchmark? Since April 2023 the benchmark is chosen from APMI's list for the strategy, and the PMS cannot quietly switch it: changing the tag means offering clients an exit without load. Check that the chosen benchmark fits the portfolio. A small cap portfolio measured against a broad index will look better than it is in a small cap boom.
3. Over which period? Look at every calendar year and the full period, not a hand picked three years. APMI publishes performance data that lets you compare approaches in the same strategy.

Test 2: the worst fall and how long it lasted

Most PMS portfolios are concentrated: 15 to 30 stocks is common. Concentration raises both the upside and the depth of a bad year. Ask for the deepest fall from a peak, the month it started and the month it recovered. A strategy that returned 20% a year but fell 45% in one stretch is a very different experience from one that returned 16% with a 20% fall. The market crash guide explains why depth and duration predict whether investors stay.

Test 3: the fee, in rupees on your amount

PMS fees come in three shapes: a fixed fee as a percentage of assets, a profit share above a hurdle, or a mix. GST at 18% is added on top. Here is the arithmetic for one year on ₹50 lakh, with a fixed 2% plus 20% of the profit above a 10% hurdle, in a year when the portfolio earns 18% before fees.

More than four points of an 18% year went in fees. Over ten years that gap compounds into lakhs. The fee calculator runs a mutual fund, a PMS and RupeeCase side by side on your amount and years, and the blog note on PMS 2 and 20 maths shows how the profit share bites in good years.

Test 4: the tax its trades create in your name

Because the shares are yours, every sale the manager makes is a capital gain in your tax return. A manager who trades often creates short term gains, taxed at 20% since 23 Jul 2024, every year, even if you never take money out. A mutual fund trades inside the fund, which pays no tax on its own gains; you pay only when you sell units. That difference can be worth a point or more a year on a busy portfolio, and the mutual fund vs direct stocks tax guide works it through. The blog note the tax you pay for someone else's trades shows the size of it.

PMS, mutual fund or a rules based index

A third route sits between them: a rules based index held in your own demat, with the rule published in advance. The RupeeCase vs PMS page compares it on fees, minimum and ownership.

How to evaluate a PMS, step by step

1. Check the registrationthe portfolio manager's SEBI registration number on sebi.gov.in, and the disclosure document.
2. Read the strategy tag and benchmarkequity, debt, hybrid or multi asset, and which APMI benchmark it reports against.
3. Ask for net TWRR by calendar yearafter all fees, every year since launch, next to the benchmark.
4. Ask for the worst fallthe depth, the start month and the recovery month.
5. Price the fee on your amountfixed fee, hurdle, profit share, high water mark method, exit load and GST, in rupees, using the fee tool SEBI requires.
6. Estimate the tax dragthe portfolio turnover and how much of the gain is short term.
7. Compare with the alternativesa low cost index fund and a rules based index on the same benchmark.

How this shows up in RupeeCase

RupeeCase is not a PMS, a mutual fund or an investment adviser. It is a technology platform: each strategy is a published rule, an index algo, executed in your own demat through your own broker, for one fee of 0.2% of the value traded at each rebalance, with no fixed fee, no profit share and no lock in. Minimums start far below ₹50 lakh. Large Mid Multi Asset is a multi asset rule of the kind a PMS might run: a momentum core on the Nifty LargeMidCap 250 with debt and gold, 42 positions rebalanced every 2 weeks, from ₹2,49,000. Its model CAGR is 34.33% with a deepest fall of −17.60%, as of 27 Apr 2026. Model figures are back tested, not client returns. The HNI solutions page explains who it is for.

Questions investors ask