PMS pitch decks love short windows, and the data shows why. Over a single month, about three in four Portfolio Management Service schemes beat their benchmark. Over five years, that falls to just over half, and that is before fees and tax. Count costs, check which benchmark each scheme chose, and look at how far apart the best and worst managers land, and the case for a PMS narrows to a minority of schemes that are hard to spot in advance.
The beat rate decays with time
Share of PMS schemes beating their own benchmark on gross returns, before fees and tax:
| Horizon | Schemes beating benchmark |
|---|---|
| 1 month | 74.9% |
| 3 months | 80.6% |
| 6 months | 63.0% |
| 1 year | 64.7% |
| 5 years | 54.6% |
| Since inception | 54.8% |
Source: APMI scheme database; data as of 30 April 2026.
The advantage thins as the horizon lengthens, and the long horizon is the one that matters for money meant to compound. Over five years, even on gross returns, about 45% of schemes trail the benchmark they chose for themselves.
Consistency is rarer still. Of the 433 schemes with a full long-term record, only 36% beat their benchmark over the one-year, five-year and since-inception windows at the same time. 18.5% beat it over none of them.
Add costs, and two in five clear the bar
Beating the benchmark on gross returns is not enough. After a PMS’s higher fees, GST, and the extra tax from frequent trading in the investor’s own demat account, a scheme needs to beat its benchmark by about 2.10% a year over five years just to match what a direct mutual fund would have netted.
| 5-year excess over own benchmark | What it means for the investor | Schemes | Share |
|---|---|---|---|
| Above 2.10% a year | Beats what a mutual fund would have netted | 169 | 39% |
| 0% to 2.10% a year | Beats its benchmark, loses to a mutual fund | 71 | 16% |
| Below benchmark | Loses even to its own chosen index | 193 | 45% |
The 2.10% bar is the modelled five-year cost-recovery hurdle for a PMS charging 1.5% plus a 10% performance fee over an 11% hurdle, with 18% GST and 60% annual turnover. Source: APMI scheme database; data as of 30 April 2026.
The benchmark a scheme grades itself against
Under SEBI’s 2022 rules, each equity PMS measures itself against one of two indices it picks: the Nifty 50 or the BSE 500. That choice can flatter the record.
Here is how PMS schemes compared with active mutual funds over five years. Each row uses the median scheme’s annual return:
| Category | 5-year median return (active) | Benchmark 5-year CAGR | Share beating benchmark |
|---|---|---|---|
| Large cap MF | 12.68% | 12.21% (Nifty 100 TRI) | 72% |
| Flexi cap MF | 14.04% | 14.03% (Nifty 500 TRI) | 60% |
| Mid cap MF | 19.58% | 20.06% (Nifty Midcap 150 TRI) | 56% |
| Small cap MF | 20.27% | 18.99% (Nifty Smallcap 250 TRI) | 88% |
| PMS benchmarked to Nifty 50 | 11.48% | 11.69% (Nifty 50 TRI) | 49% |
| PMS benchmarked to BSE 500 | 14.80% | 13.88% (BSE 500 TRI) | 57% |
TRI: Total Return Index. Source: AMFI NAV database, APMI scheme database, NSE Indices; data as of 30 April 2026.
Active equity funds beat their category index between 56% and 88% of the time, depending on the category. The two PMS groups managed 49% and 57%, and that is measured on gross returns, before the heavier PMS cost stack.
What “multi cap” PMS schemes actually hold
The deeper problem is that a scheme can hold one kind of portfolio and grade itself against another. An audit of 121 schemes labelled “Multi Cap & Flexi Cap” found this mix:
| Actual portfolio tilt | Share of schemes |
|---|---|
| Genuinely diversified flexi cap (no extreme tilt) | 50% |
| Small-cap heavy (over 50% small cap) | 26% |
| Mid-and-small heavy (over 65% mid plus small cap) | 14% |
| Large-cap heavy (over 65% large cap) | 8% |
| Mid-cap heavy (over 40% mid cap) | 2% |
Source: PMS Bazaar; data as of 31 March 2026.
Only half are what the label says. A quarter are really small-cap portfolios.
That matters because of the benchmark gap. Suppose a small-cap-heavy scheme grades itself against the Nifty 50, which returned 11.7% a year over five years to 30 April 2026. The right yardstick, the Nifty Smallcap 250, returned 19%. On paper the scheme can report 4% a year of outperformance while actually trailing its proper benchmark by 3%.
The manager is the whole bet
The spread between good and bad outcomes is far wider in PMS than in mutual funds. Take ₹50 lakh invested for five years:
| Scheme percentile | PMS (gross) | Flexi cap mutual fund |
|---|---|---|
| 10th (weak) | 6.96% a year → about ₹70 lakh | 11.6% a year → about ₹87 lakh |
| 90th (strong) | 22.6% a year → about ₹1.39 crore | 19.6% a year → about ₹1.22 crore |
| Spread | about ₹69 lakh | about ₹35 lakh |
The spread between the best and worst flexi cap funds is about half as wide as it is in PMS. In other words, the risk of choosing the wrong manager is nearly twice as large in a PMS. The PMS figures are gross. Applying PMS costs lowers the whole range without narrowing it, so the wider spread holds either way.
There is a quieter risk inside that bet: continuity. A discretionary PMS is often built around a single named manager. The scheme’s record, its inflows and its identity can rest on one person. A star-led scheme can deliver for several years and then fade when that manager’s edge cools or they move on. A fund house’s process and research bench tend to outlast any one manager.
Size is a rough guide too. Performance tends to be strongest in the ₹500 crore to ₹1,000 crore range: large enough to attract talent, small enough to act on the best ideas. Below ₹100 crore, schemes miss more often than they hit. The very largest run into capacity limits.
Does the pattern hold across market cycles?
One five-year window can mislead. The comparison was rerun at every quarter-end from June 2023 to March 2026. Those twelve windows span the late-2024 market peak and the turbulent year that followed.
- Beating the benchmark: active equity mutual funds (direct plans of large, mid, small, flexi and large-and-mid cap funds) cleared their benchmark most often. PMS schemes measured on gross returns ran below the funds in most windows and only briefly above them. After a 3% cost proxy, the net PMS line sat below both in all twelve windows.
- Median returns: even on gross returns, the median active fund beat the median PMS in all twelve windows. The average gap was about 4% a year, and it was never less than 1%. In every window, only about three in ten PMS schemes beat the median active fund.
| Window ending | Median PMS 5-year return (gross) | Median active equity MF 5-year return |
|---|---|---|
| June 2023 | 11% | 16% |
| March 2025 | 24% | 29% |
| March 2026 | 11% | 15% |
Source: ACE MF, APMI scheme database; data as of 31 March 2026.
The pattern did not depend on the cycle.
A checklist before choosing a PMS
- Check the benchmark. Compare what the portfolio holds with the benchmark it reports against. A small-cap portfolio measured against the Nifty 50 is flattering itself.
- Use five years, not one. Ask for the five-year and since-inception record, net of all fees.
- Apply the hurdle. Look for an excess return above about 2% a year over the right benchmark. Below that, a direct mutual fund would have left you better off.
- Check who runs it. Ask who makes the decisions, how long they have been there, and what happens if they leave.
- Check the size. Look at the scheme’s assets against the ₹500 crore to ₹1,000 crore range where results have tended to be strongest.
A PMS can win, and roughly two in five clear their own hurdle. For an investor who can identify one of them and live with the wider range of outcomes, a PMS can be one holding among several. For most, a direct mutual fund delivers actively managed equity exposure from ₹500 a month, with lower cost, kinder taxation and more predictable outcomes.
Source: “How Often Does a PMS Beat a Mutual Fund”, 1 Finance Magazine, June 2026 (Issue 11). Data from the APMI scheme database, AMFI NAV database, ACE MF, NSE Indices and PMS Bazaar.
