Despite a challenging start to 2024 Indian equities have delivered a strong performance (15%) in the first half (Jan to June). But PMSes have outshone (17%) even the market returns in the first six months.

This year, 2024 has been a year of significant turbulence. Global conflicts have raged, while domestic political tensions have escalated. Despite expectations of cooling inflation, prices have continued to climb, prompting the Federal Reserve and Reserve Bank of India to maintain interest rates, contrary to initial predictions of multiple rate cuts.

Given these challenging conditions, it is surprising that the stock market has performed relatively well. The S&P BSE 500 surged by 15% in the first half of the year, and the Nifty 50 delivered an 11% return during the same period. In this context, Portfolio Management Services (PMS) have exhibited impressive performance, generating robust returns of 17.42%.

Let us analyse the performance of PMSes across different categories.

Strong performance overall

Market volatility often drives investors towards the perceived safety of large-cap or blue-chip stocks. These established companies typically exhibit lower volatility compared to their mid and small-cap counterparts. Additionally, multi-cap funds, which invest across the market capitalisation spectrum, tend to perform well during turbulent times. This pattern was evident in the PMS landscape during the first half of 2024.

Within the PMS Bazaar’s universe, of the total of 389 investment approaches 238 of them have beaten their respective benchmark, about 61% of the PMSes. Overall, PMSes delivered a robust average return of 17.42%. This outperformance can be attributed to the active management style employed by PMS fund managers and their ability to capitalise on market opportunities while mitigating risks. The active nature of PMS investments allows managers to dynamically adjust portfolios based on changing market conditions, a strategy that proved particularly effective during the volatile first half of 2024.

Small and mid-cap PMSes emerged as top performers during the first half of the year, with an average return of 18.97%. An impressive 60% of these PMSes outperformed their benchmarks. 

Multi-cap PMSes also excelled, with 113 out of 174 approaches surpassing their benchmarks, which is about 65% of the multi cap PMSes, and delivering an average return of 18.65%. 

While the large and mid-cap category exhibited the highest outperformance rate, with 71% of PMSes beating their benchmarks, the average return of 18.31% was slightly lower than the other two categories.

These findings highlight the potential benefits of investing in actively managed funds, particularly during periods of market turbulence. By carefully selecting and timing investments, PMS managers can generate alpha and deliver superior returns for their investors.

The table below indicates the PMS categories and their benchmark outperformance:

What has helped the performance?

Let’s understand how the top 3 categories and the respective PMS investment approaches delivered superior returns. 

Small & Mid Cap category 

The small and mid-cap category emerged as the top-performing segment within the PMS Bazaar universe during the first half of 2024. Of the approximately 30 PMSes in this category, an impressive 18 outperformed their respective benchmarks, delivering an average return of 18.97%.

The top performers in this category are: 

Green Lantern's growth fund stands out as the top performer within this category. This PMS primarily invests in small and mid-cap stocks across various sectors, with a particular focus on automobiles and auto components, capital goods, and consumer services.

The second in this category is the aggressive PMS from Badjate Stock Shares. This PMS maintains a concentrated exposure to small and mid-cap companies, with 65.28% and 28.7% allocations, respectively. The remaining portion is invested in large-cap stocks (3.22%) and cash equivalents (2.76%). 

The PMS's top five sectors—capital goods, financial services, healthcare, construction, and automobiles and auto components—account for a substantial 69.47% of the portfolio. 

Notably, the top five stocks, including Mazagon Dock Shipbuilders, BSE, Garden Reach Shipbuilders, Suzlon Energy, and Va Tech Wabag, contribute 27.04% to the portfolio.

QED Capital Advisors' Alphabets PMS is the third PMS in this category, although detailed sector and stock information is currently unavailable. The PMS portfolio holds a total of 27 stocks.

Multi Cap category 

The multi-cap PMS category exhibited strong performance during the first half of 2024. A total of 174 multi-cap PMSes were tracked within the PMS Bazaar universe, with an impressive 113 funds outperforming their respective benchmarks. This category generated an average return of 18.65% in the 6 months since January.

Here are the top PMS investment approaches in this category: 

Moat Financial Services' UpperCrust Wealth Fund emerged as the top performer within the multi-cap category, delivering exceptional returns of 41.08%. This fund adopts a diversified investment approach, allocating capital across small, mid, and large-cap stocks. The fund management team emphasises high-conviction investing, focusing on strong business fundamentals and a balanced approach to growth and risk management. Notably, the fund avoids investing in initial public offerings (IPOs).

Invasset’s Growth Pro Max PMS secured the second position. The fund's top five holdings accounted for a significant 32.57% of the portfolio. Garden Reach Shipbuilders & Engineers, Mazagon Dock Shipbuilders, and Hindustan Aeronautics were the top three holdings, collectively representing a substantial portion of the fund's assets.

Stallion Asset Core Fund claimed the third spot in the multi-cap category. This fund invested in 29 stocks, with a balanced allocation of 40.34% to small caps, 41.70% to large caps, and 9.75% to mid caps. The remaining portion was held in cash and cash equivalents. The fund's top five sectors—consumer discretionary, financial services, FMCG, industrials, and healthcare—contributed significantly to the portfolio, accounting for 83.33% of its holdings.

Large & Mid cap category 

The large and mid-cap category demonstrated strong performance within the PMS Bazaar universe. Out of the 14 PMSes in this category, a commendable 10 outperformed their respective benchmarks, achieving an average return of 18.31%.

Here are the top PMS Investment Approaches in this category: 

Green Lantern Capital's Alpha Fund secured the top position in this category. While primarily focused on large and mid-cap stocks, the fund also explores select small-cap opportunities. The investment strategy centres on identifying market leaders with robust balance sheets, superior earnings growth, and consistent free cash flow generation. The fund's top five holdings span across sectors such as healthcare, construction, capital goods, and financial services.

Alchemy Capital Management's Smart Alpha 250 claimed the second spot with impressive returns of 28.49%. The fund's top five holdings, contributing 29.26% to the portfolio, included Dixon Technologies, Trent, Power Finance Corporation, HAL, and BHEL. These stocks represent sectors like consumer durables, consumer services, financial services, and capital goods.

Torus Oro Portfolio Management's All Weather Portfolio occupied the third position. This fund maintained a diverse portfolio of 25 stocks, with the top five sectors contributing 66.77% to the overall holdings. The fund allocated 61.24% to large caps, 36% to mid caps, and the remaining towards small caps and cash equivalents. Financial services, automobiles and auto components, consumer services, power, and capital goods were the top 5 sectors in the portfolio.

Other categories of PMS Investment Approaches are as follows: 

Flexi Cap Category 

The flexi-cap category, comprising 50 PMS investment approaches, contributed to a category average return of 17.94%. Of these, 30 outperformed their respective benchmarks.

Mid Cap Category 

The PMS category under consideration delivered an average return of 17.26%. 50% of the PMSes within this category, specifically 26 out of 52, managed to outperform their respective benchmark indices.

Small Cap Category 

The small-cap category faced challenges amidst the market volatility, resulting in lower returns compared to other categories. Despite the overall market conditions, nine out of 22 PMS investment approaches within this category managed to outperform their respective benchmarks. The category delivered an average return of 16.84% for the period.

Things to note 

While the data presented offers a snapshot of PMS performance during the first half of 2024 (Jan to June), it is essential to remember that short-term performance doesn't necessarily predict long-term results. For substantial wealth creation, a longer investment horizon of typically over two years is generally recommended.

The specific stocks, sectors, and PMSes mentioned here are for informational purposes only and should not be construed as investment advice. Keep in mind that the portfolio composition and investment decisions are subject to change based on the portfolio manager's strategies and market conditions. It is important to conduct thorough research or consult with a qualified financial advisor before making any investment choices.