Can PMS Investments Consistently Outperform? 10-Year Data Suggests Yes

Within the PMS Bazaar universe, over 77% of PMSes outperform their respective benchmark in 10 years.

25 Mar 2024
Can PMS Investments Consistently Outperform? 10-Year Data Suggests Yes

The Indian stock market has performed well over the past decade, despite periods of volatility. The Nifty 50 TRI and BSE 500 TRI indexes have delivered returns of 14.73% and 16.7% respectively over this period. 

In this regard, the Portfolio Management Services (PMS) have delivered superior returns in the past 10 years (data as of Feb 29, 2024). Out of 53 PMS approaches that completed 10 years, within the PMS Bazaar universe, 41 outperformed, their benchmarks, the Nifty 50 TRI and BSE 500 TRI. The average return for these PMS approaches was 18.94%.

Interestingly, most of these top performers were multi-cap funds. This category offers diversification benefits and allows portfolio managers more flexibility in stock selection. And this flexibility has helped PMS managers generate returns for investors, even during volatile periods. It also indicates that long-term investing can be a successful wealth-creation strategy.

Here are the top 10 equity PMS investment approaches based on the 10-year performance: 

A snapshot of the Top 5 PMSes

Aequitas Investment Consultancy Pvt Ltd's India Opportunities Product stands out as a top performer with an impressive 36.36% return over the past decade. This fund focuses primarily on the small-cap category, allocating around 65% of its holdings in that category. The top sectors it invests in include capital goods, construction, and telecommunication. Notably, the one-year performance was a stellar 92.58%. This PMS approach holds 38 stocks in its portfolio with the top 5 stocks constituting about 36%. Here is a snippet about the approach: 

The Master Trust India Growth Strategy, offered by Master Portfolio Services Ltd, is a PMS investment approach that focuses on investing in mid-cap companies. With a track record of over 12 years, this strategy has delivered a return of 30.08% in the last 10 years. Under this approach, the PMS holds about 25 stocks in its portfolio. Here is a snippet of the approach: 

Globe Capital Market Ltd – Value – has topped third in the list and invests in multi cap. This means the investment portfolio is not limited by company size and invests across large, mid, and small-cap stocks. Notably, this strategy is their oldest with over 16 years of existence (within the PMS Bazaar universe). Over the past 10 years, this particular PMS strategy has delivered a cumulative return of 28.73%. Here is a snippet about the approach: 

Up next is Nine Rivers Capital Holdings Pvt Ltd’s small cap PMS investment approach - Aurum Small Cap Opportunities. It has been in the industry for over 11 years. While this approach has delivered over 28% in the past 10 years, in the 1 year, this has given 64.9% returns to its investors. 

The PMS approach in the fifth spot (based on 10-year performance) is Accuracap’s Picopower. A small and mid cap PMS that has delivered 24.46% returns in 10 years and 62.21% in the past year. It has about 79% allocation to small cap, 21% to mid cap and the remaining amount is held as cash. This PMS has nearly 30% allocation to the capital goods sector. The other sectors among the top 5 sectors include financial services, healthcare, IT and consumer durables.  Here is a snippet: 

What has helped the performance? 

The strong performance of the equity market has helped in the performance of PMS investment approaches. Experts believe several factors have contributed to the strong performance of the Indian stock market. These include a healthy corporate environment, a history of good returns, and a strong regulatory framework. Further, international investors are also expected to be drawn to the Indian market due to its strong earnings growth and attractive returns. 

As such, with an increasing number of high-networth individuals and their growing appetite for sophisticated investment options means that more people take to PMS investments. 

But remember, before choosing a PMS investment approach, it is important to consider your risk tolerance and minimum investment amount. Past performance is not a guarantee of future results. Diversification and a long-term investment horizon are essential for any successful investment strategy.

Note: All data as of February 2024. 

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