PMS Versus Investment Advisory : Which Is Better?

There are various ways in which an investor can participate in the equity markets. Portfolio management service or PMS is emerging as one of the most promising ways to participate in the markets for high net-worth individuals (HNIs). But is PMS the best way to beat benchmark indices or is hiring a decent investment advisory service (IAS) good enough to beat benchmark indices? Ganesh Vaybase explores the pros and cons of PMS versus IAS while also exploring the benefits of mutual fund investing

- Ganesh Vaybase

Portfolio management service (PMS) has come a long way in India. Almost 77 per cent of the PMS’ have been able to beat Nifty in September even as Nifty delivered negative returns in the same month, if we were to believe the data published by PMS Bazaar. Some of the PMS’ have even gone on to generate returns up to 14 per cent in September when the Nifty struggled. Large-caps have underperformed in September and hence those strategies that were skewed towards broader markets were seen outperforming.

Such a superlative performance of PMS’ in the short term attracts attention no doubt. However, one has to understand the overall trend in the wealth management industry in India to understand the growth curve of the PMS industry. India is consistently ranked amongst the top ten nations in terms of expected growth in the wealth management industry. The industry is expected to clock higher double-digit growth and is truly one of the fastest growing markets globally.

Rising GDP, favourable demographics and lower penetration are some of the key factors proving to be the growth drivers for the wealth management industry in India. Wealth management is a broad industry and the PMS industry is a small sub-set of the wealth management industry, which promises to grow steadily as stock markets continue to impress investors in spite of the current pandemic. In fact the current pandemic has acted as a boon to the industry and has revived the risk appetite of several investors.