PMS Bazaar data reveals that all the equity PMS categories have delivered over 35% return on average in the past year beating the market, represented by Nifty 50 return of 33%.

Portfolio Management Services (PMS) have consistently outperformed benchmark indices like the Nifty 50 and BSE 500. This success is primarily attributed to the PMS fund managers’ active fund management strategies. PMS managers carefully select stocks, rotate sectors, and employ other tactics to ensure timely entry and exit, ultimately generating alpha and creating wealth for investors.

In the past year, all equity PMS categories, including large-cap, mid-cap, small-cap, multi-cap, and more, have significantly surpassed the Nifty 50 TRI and BSE 500 TRI. For this purpose, 378 data within the PMS Bazaar universe that has completed one year, as of August 2024, were considered. The data shows the effectiveness of PMS in delivering superior returns to investors.

PMS categories outperform the market 

There are 378 different PMS investment approaches within the PMS Bazaar universe, each categorised based on its unique style. These styles include Flexi Cap, Large & Mid Cap, Large Cap, Mid Cap, Small Cap, Multi Cap, Flexi Cap, Small & Mid Cap, Thematic, and Sectoral PMSes. 

In the past year, all equity-focused PMS categories have achieved impressive returns of over 35% (data as of Aug 2024). The Large & Mid Cap category stands out with the maximum returns at 47.64%, while the Small Cap category recorded the minimum returns at 37.98%. 

As such over the last year, Large & Mid Cap PMS category has emerged as the top performer, delivering an average return of 47.64%. Following closely, Small & Mid Cap PMS category achieved an average return of 42.67%, securing the second position. Flexi Cap PMS categories claimed the third spot with an average return of 42.45%.

Source: PMS Bazaar; Data as of August 2024

Benchmark outperformance 

While the large and mid cap PMS category has topped the chart with its performance compared to other PMS categories, the data reveals a slightly different perspective with respect to benchmark outperformance.

Large-cap funds, which invest in well-established companies with substantial market presence, have historically offered a degree of stability and resilience. These companies often possess strong financial foundations, established brands, and a proven track record of navigating economic fluctuations. While the overall category average return for large-cap PMS was a respectable 38.91%, the benchmark outperformance was particularly noteworthy, suggesting that these funds have effectively capitalised on market opportunities and outpaced their respective benchmarks. As such, out of 25 large cap PMSes, about 64% of them have outperformed their respective benchmark indices. 

Let’s take another example. The multi asset PMS category has seen the second highest benchmark outperformance in this past year. Of the 15 PMSes, 10 of them have outperformed their respective benchmark (66.67%). The multi asset PMSes employ a diversified investment strategy that spreads risk across various asset classes. This approach aims to mitigate the impact of market volatility and potentially enhance risk-adjusted returns. By investing in a combination of equity, fixed income, commodities, and potentially other asset classes, multi-asset PMS can offer a more balanced and less correlated portfolio. Despite a slightly lower category average return compared to other equity PMS categories, multi asset PMS category has exhibited impressive benchmark outperformance, indicating their ability to generate returns in diverse market conditions.

That said, while benchmark outperformance is a valuable indicator, it's not the sole determinant of a fund's success. Factors such as investment objectives, risk tolerance, and individual investor circumstances also play a crucial role in evaluating the suitability of a particular PMS.

Small & mid cap PMS 

Small and mid-cap PMS funds have also delivered impressive returns, with an average of 42.67%. Out of 33 funds, 27 have outperformed the Nifty 50 TRI, and 18 have surpassed the BSE 500 TRI. The top 3 funds have generated returns exceeding 50%, with Green Lantern - Growth Fund leading the way at a remarkable 98% up to August 2024.

Flexi and multi cap PMS category 

Both Flexi-cap and Multi-cap PMS categories delivered comparable returns in the past year, with average returns of 42.45% and 42.15%, respectively. Although there is no clear-cut distinction between the two, PMS fund managers differentiate themselves based on their allocation to small, mid, and large-cap stocks.

Of the 45 Flexi cap PMS approaches, 21 outperformed their benchmark by an average of 46.47%. In the Multi cap category, 95 out of 170 funds surpassed their benchmark, with an average outperformance of 55.88%. Notably, the top-performing funds in both categories achieved returns exceeding 70%.  

Top 3 PMSes in flexi cap category are as follows: 

Top 3 PMSes in multi cap category are as follows: 

Takeaway 

PMS investments have delivered impressive returns in the past year, with an average return of 40.55% across 378 investment approaches. Notably, 56% of these PMS funds outperformed the benchmark indices, Nifty 50 TRI and BSE 500 TRI.

Among the various PMS categories, large & mid-cap and small & mid-cap funds significantly outperformed large-cap funds. This success can be attributed to the overall optimistic market sentiment, fueled by positive economic growth forecasts. While investors in small and mid-cap segments have benefited from higher returns in the past year, they should carefully consider their risk tolerance before investing in these segments going forward due to growing valuation concerns.

Remember, past performance is not a guarantee of future results. However, PMS can be an attractive option for High-Net-Worth Individuals (HNIs) and Ultra-High-Net-Worth Individuals (UHNIs) seeking to grow their wealth through strong performance across different categories and the ability to navigate market volatility.