When star mutual fund managers quit their jobs to start their own ventures, they have often begun their new innings by becoming portfolio management service (PMS) providers.
Over the years there has been an influx of fund managers – they could earn big if they succeeded on their own – and alongside there are wealthy clients looking for an edge beyond that offered by traditional mutual funds.
The result is that the more specialised (and often riskier) PMS sector looks poised to end 2024 with more than Rs 10 trillion in assets.
It had less than Rs 5 trillion as late as 2019. The headline PMS industry’s assets in total are reported at than Rs 36 trillion but those include nearly Rs 26 trillion from the Employees’ Provident Fund Organisation (EPFO) and similar entities which largely invest in passive funds that do not require active fund manager intervention.
Core assets, excluding money from entities like the EPFO, are at Rs 10.2 trillion, according to Business Standard calculations which looked at data from the Securities and Exchange Board of India (Sebi) and subtracted money from EPFO and similar organisations.
Such organisations’ contribution is available in aggregate and a break-up of individual investment categories is unavailable.
Listed equity PMS assets have tripled since Financial Year 2018-19 (FY19), helped by a pandemic-era bull market. Unlisted equity assets have also grown over the same period but are a smaller part of the pie.
Investors are taking exposure to unlisted equity assets through alternative investment funds (AIFs) rather than PMS.
An AIF has a minimum investment requirement of Rs 1 crore compared to Rs 50 lakh for PMS.
The AIF route has gained popularity among fund managers who earlier worked under the PMS umbrella.
The AIF industry has investments worth more than Rs 5 trillion and commitments worth over Rs 12 trillion, according to the latest available September quarter data.
When Sebi in December introduced a category called Specialised Investment Fund that requires a minimum investment of Rs 10 lakh, it added to the competition for assets which would earlier have perhaps gone to the PMS industry.
Debt assets have grown slower than equity but have doubled since FY19.
Sebi data suggests limited capital deployed in sophisticated structured debt instruments. Most of the money (over 99 per cent) is invested in plain debt.
PMS assets excluding EPFO and similar entities have grown 116 per cent since FY19, while overall assets including EPFO and others are up 126 per cent.
The mutual fund industry, the cradle from which PMS drew its stars, has grown 188 per cent in the same period.
