Updated February 2026 | All performance data as of December 31, 2025 (Calendar Year 2025) unless stated otherwise

Most comparisons between PMS and mutual funds read like a compliance document. A table with tick marks. Minimum investment here, fee structure there, move along.

This isn't that article.

This is a data-backed, unflinching look at what happens when you put real money — ₹50 lakhs, ₹1 crore, ₹5 crore — into each of these vehicles. Who actually wins? When? And what doesn't anyone tell you?

I've spent 18 years in financial services. I've managed ₹7,000 crore in treasury operations. I've seen both sides of this debate from the inside. What follows is what I wish someone had told me — and what I now tell every investor who walks through our door.

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India's Two Investment Powerhouses by the Numbers

Let's set the stage with what we're actually comparing.

Parameter	Mutual Funds	PMS
Industry AUM	₹80.23 lakh crore	₹8.63 lakh crore (non-EPFO/PF)
Number of schemes/strategies	1,908 open-ended schemes	487 SEBI-registered portfolio managers
Strategies tracked by aggregators	—	1,257 (1,115 equity + 142 multi-asset)
Monthly SIP inflows	₹31,002 crore (record, Dec 2025)	Not applicable
Minimum investment	₹500 (SIP) / ₹5,000 (lump sum)	₹50 lakhs (SEBI mandate)
Investor base	26.12 crore folios	2.05 lakh discretionary clients
Regulator	SEBI	SEBI

Sources: AMFI (Dec 2025), SEBI Report of Portfolio Managers (Dec 31, 2025). PMS total AUM including advisory and EPFO is ₹41.59 lakh crore; the non-EPFO/PF figure of ₹8.63 lakh crore represents the investable PMS market. PMS strategy count from Grey Sky Capital's PMS Performance Monitor (Dec 2025).

Both vehicles are regulated by SEBI. Both invest in Indian markets. But the similarity ends there.

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Part 1: CY 2025 Performance — The True Apples-to-Apples Comparison

Let's start with what matters most — returns. Same time period (Calendar Year 2025), same ending date (December 31, 2025), for both PMS and mutual funds.

First, the Benchmarks

CY 2025 was a tale of two markets. Large caps did well, but mid and small caps struggled:

Index	CY 2025 Return (Price)
Nifty 50	+10.5%
Sensex	+9.1%
Nifty 500	+6.7%
Nifty Midcap 150	+5.4%
Nifty Next 50	+2.0%
Nifty Smallcap 250	-6.0%

Source: BW Businessworld, NSE. Total Return Index (TRI) versions would be approximately 1.2-1.5% higher due to dividends.

How Equity Mutual Funds Fared (CY 2025)

Category	Average Return	Top Performer	Return
Large Cap	+6.50%	ICICI Pru Large Cap	~10%
Flexi Cap	+2.70% (median 3.68%)	HDFC Flexi Cap	+10.68%
Large & Mid Cap	+3.76%	SBI Large & Midcap	+9.39%
Multi Cap	+2.08% (median 2.77%)	—	—
Mid Cap	+1.90% (median 1.87%)	HDFC Mid Cap	+6.50%
Small Cap	Negative (nearly all funds)	—	~0.28%

Source: Ace Mutual Fund via Outlook Money (Dec 30, 2025). Returns are for direct plans.

Not a single equity mutual fund category delivered double-digit average returns. Small caps — the category most investors had piled into — was the biggest disappointment. Flexi caps, the "all-weather" choice, averaged just 2.70%. Parag Parikh Flexi Cap, the category's biggest fund at ₹1.29 lakh crore AUM, managed +7.85%. The worst flexi cap fund (Samco Flexi Cap) lost -15.49%.

How PMS Fared (CY 2025) — Same Period, Same Data Cut

Now the same calendar year, for 1,257 PMS strategies:

Category	Strategies	Mean Return	Median Return
Equity PMS	966 (with 1Y data)	+0.25%	+0.26%
Multi-Asset PMS	103 (with 1Y data)	+9.62%	+10.29%
All PMS Combined	1,069	+1.70%	+1.02%

Source: Grey Sky Capital PMS Performance Monitor (Dec 31, 2025). Returns are 1-year CAGR ending Dec 31, 2025, post-fees, as reported by respective portfolio managers to SEBI.

Read those equity PMS numbers again. The average equity PMS delivered just +0.25% in CY 2025 — worse than the average flexi cap mutual fund (+2.70%), worse than the average large cap mutual fund (+6.50%), and dramatically worse than the Nifty 50 (+10.5%).

Only 51% of equity PMS strategies delivered positive returns. Nearly half were in the red.

Why Did Equity PMS Underperform So Badly?

The answer is structural. Most equity PMS strategies are concentrated mid-cap and small-cap portfolios — typically 15-25 stocks with meaningful small/mid-cap exposure. In a year when large caps surged (+10.5%) but the Nifty Smallcap 250 fell -6%, PMS strategies were swimming against the tide. Mutual funds, with their broader diversification (50-80 stocks) and SEBI-mandated large-cap minimums, were better positioned for a large-cap-led market.

The Multi-Asset Exception

Here's what stands out: multi-asset PMS strategies averaged +9.62% — outperforming every single equity mutual fund category and nearly matching the Nifty 50 itself. With a median return of +10.29%, more than half the multi-asset PMS strategies beat the index.

By diversifying across equity, gold, and debt with dynamic allocation, these strategies captured the large-cap equity rally while benefiting from gold's strong CY 2025 performance and debt stability. This isn't a coincidence — it's the structural advantage of flexible multi-asset allocation.

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Part 2: The Dispersion Problem Nobody Talks About

Here's the part that changes the entire PMS conversation.

CY 2025 Equity PMS: The Full Distribution

Metric	Equity PMS (964 strategies)
Mean return	+0.25%
Median return	+0.26%
Top decile (P90)	+10.45%
Top quartile (P75)	+6.29%
Bottom quartile (P25)	-4.77%
Bottom decile (P10)	-12.04%
Best performer	+41.81% (Aequitas India Opportunities)
Worst performer	-51.40%
P90-P10 spread	22.49 percentage points
P75-P25 spread	11.07 percentage points

Source: Grey Sky Capital PMS Performance Monitor (Dec 31, 2025). Two outliers beyond ±100% excluded from cleaned analysis.

Compare this to flexi cap mutual funds: the full range from worst (-15.49%) to best (+10.68%) was about 26 percentage points. Equity PMS, even after removing extreme outliers, had a spread of over 90 percentage points.

The insight nobody discusses: PMS has both dramatically higher ceilings AND much lower floors than mutual funds. The top decile of equity PMS (+10.45%) was comparable to the best flexi cap fund. But the bottom decile (-12.04%) was worse than the worst flexi cap fund. And the bottom quartile was in the red.

This means manager selection in PMS is 10x more important than in mutual funds.

How the Biggest PMS Strategies Did

What about the large, established PMS managers — the ones investors are most likely to choose?

PMS Strategy	CY 2025 Return	AUM (₹ Cr)
Enam India Equity Portfolio	+3.94%	24,132
Quantum Advisors India Value Equity	+6.41%	19,453
ICICI Prudential PMS Contra Strategy	+10.41%	13,043
Buoyant Capital Opportunities PMS	+16.59%	8,019
Abakkus All Cap Approach	+11.14%	7,710
ASK Indian Entrepreneur Portfolio	+6.19%	8,938
Banyan Tree Growth at Reasonable Price	+7.59%	5,963
Aequitas India Opportunities	+41.81%	4,265
ValueQuest Alpha	-3.75%	10,889
Stallion Asset Core Fund	-1.68%	6,562
Motilal Oswal Next Trillion Dollar	-5.82%	4,804
Motilal Oswal Founders Portfolio	-11.88%	3,601
ValueQuest Platinum	-13.39%	3,229

Source: Grey Sky Capital PMS Performance Monitor (Dec 31, 2025).

Of the top 30 equity PMS by AUM, only 3 beat the Nifty 50 price return of +10.5%. Large AUM didn't protect against underperformance.

Beating the Benchmark: The Odds

Benchmark	Equity PMS beating it	Percentage
Positive returns (>0%)	492 / 964	51.0%
Beat Nifty 500 price return (+6.7%)	221 / 964	22.9%
Beat Nifty 50 price return (+10.5%)	94 / 964	9.8%
Beat 15%+	38 / 964	3.9%

Source: Grey Sky Capital PMS Performance Monitor (Dec 31, 2025).

In CY 2025, fewer than 1 in 10 equity PMS strategies beat the Nifty 50. That's a sobering number — especially when you're paying 2-3% in fees on top.

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Part 3: The Longer-Term Picture — Where PMS Redeems Itself

One year can be misleading. CY 2025 was a uniquely difficult year for small/mid-cap concentrated portfolios. The longer-term data tells a more balanced story.

3-Year and 5-Year PMS Performance (ending Dec 31, 2025)

Metric	Equity PMS 3Y CAGR (670 strategies)	Equity PMS 5Y CAGR (520 strategies)
Mean	15.88%	16.19%
Median	16.13%	15.52%
P90	25.01%	25.54%
P10	6.90%	8.09%
% Positive	93.1%	94.2%

Source: Grey Sky Capital PMS Performance Monitor (Dec 31, 2025).

Over 5 years, the median equity PMS delivered 15.52% CAGR. Compare that to the Nifty 50's 5-year price CAGR of ~13.3% (ending Dec 2025). The median PMS outperformed the benchmark — and 94% of PMS strategies with a 5-year track record delivered positive returns.

The 10-Year PMS Story

As of July 2024, out of 408 investment approaches tracked by PMS Bazaar, 60 equity PMS strategies had a 10-year track record. Their average return: 17.35% CAGR — beating both the BSE 500 TRI (15.67%) and the Nifty 50 TRI (13.80%) over the same decade.

The top 10 PMS strategies delivered over 20% CAGR for 10 years, ranging from 20.54% to 29.58%. Aequitas India Opportunities topped the charts at 29.58%.

What this means in real money: ₹50 lakh invested in the average top-10 PMS ten years ago would have grown to approximately ₹2.5 crore. The same ₹50 lakh in a Nifty 50 index fund would be approximately ₹2 crore.

Source: PMS Bazaar 10-Year Review (July 2024 data).

PMS vs Mutual Funds: The Head-to-Head Study

PMS Bazaar's comprehensive study analysed 335 PMS investment approaches and 388 mutual funds (regular plans) across multiple timeframes.

The headline finding: PMS outperformed benchmarks 70% of the time on average, while mutual funds managed 48%.

Time Period	PMS Benchmark Beat Rate	MF (Regular) Benchmark Beat Rate
1 Year	86%	~47%
3 Years	58%	~50%
5 Years	59%	46%
10 Years	Nearly all	~48%

Source: PMS Bazaar study. Data as on Dec 31, 2023. Regular plan MF data used.

Over 10 years, nearly every PMS strategy with a track record beat its benchmark. For mutual funds, it was roughly a coin flip.

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Part 4: Structural Differences That Actually Matter

1. Ownership Structure

Feature	Mutual Fund	PMS
What you own	Units of a pooled fund	Individual stocks in your demat
Portfolio visibility	Monthly (top holdings)	Real-time (your demat account)
Customisation	None	Can exclude stocks/sectors
Exit	Redeem units (T+2/T+3)	Sell individual stocks

2. Concentration

Mutual funds typically hold 40-80 stocks. SEBI limits single-stock exposure to 10% for large caps. PMS portfolios typically hold 15-25 stocks, with some concentrated strategies running 8-12 stocks. This concentration is both the source of PMS outperformance AND its risk.

3. Tax Advantage — Stock-Level Harvesting

Post-July 2024, equity taxation is identical for MF and PMS: 20% STCG (under 12 months), 12.5% LTCG (above ₹1.25 lakh exemption). But PMS has a structural edge: since you own individual stocks, your portfolio manager can harvest losses on specific positions to offset gains — something impossible in a pooled mutual fund structure.

For investors in the 30%+ tax bracket with ₹1 crore+ portfolios, this stock-level tax loss harvesting can potentially save ₹2-5 lakh annually, depending on portfolio turnover and market conditions.

4. Fee Structure

Component	Mutual Fund (Direct)	PMS (Typical)
Management fee	0.5-1.0% (expense ratio)	1.5-2.5% fixed
Performance fee	None	10-20% above hurdle rate
Exit load	1% within 1 year (typical)	0-3% (varies by manager)
All-in annual cost	0.5-1.0%	1.5-4.0% (with performance fee in good years)

The fee difference is significant. In years where PMS outperforms, the performance fee erodes a chunk of the alpha. The CY 2025 equity PMS numbers (+0.25% average) are already post-fee — meaning gross returns were likely in the 2-3% range before fees dragged them further down.

A wealth creation scenario:

₹1 crore invested for 10 years:

Vehicle	Assumed Return	Fees	Final Value
Nifty 50 Index Fund	12%	~0.2%	~₹3.05 crore
Top Flexi Cap MF	18%	~0.7%	~₹4.95 crore
Top Quartile PMS (25% gross, 3.5% all-in fee)	25%	~3.5%	~₹7.18 crore
Average PMS (15% gross, 2.5% fee)	15%	~2.5%	~₹3.25 crore

These are illustrative projections to show fee impact. Actual returns will vary. Past performance is not indicative of future returns.

The top-quartile PMS, even after fees, creates ₹2+ crore more than the best mutual fund. But the average PMS, after fees, barely beats an index fund. That's the fee math that matters.

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Part 5: When Mutual Funds Are the Better Choice

Let me be clear: for most Indian investors, mutual funds are the better vehicle. Here's when:

Your investable surplus is below ₹50 lakhs. That's the SEBI minimum for PMS. Below this, the discussion is academic.

You value simplicity. Mutual funds require zero monitoring. Set up SIPs, forget for 10 years, come back to a pleasant surprise. PMS requires engagement — reviewing portfolio changes, understanding why specific stocks were bought or sold.

You want broad diversification. A single flexi cap fund gives you 50-70 stocks across market caps. PMS portfolios are inherently concentrated — that's the source of both their returns and their risk.

You can't tolerate short-term underperformance. CY 2025 is a perfect example. The average equity PMS returned just +0.25% while the average large cap MF delivered +6.50%. If seeing that gap for 12 months would make you panic and exit, PMS isn't for you.

You want predictable costs. MF expense ratios are fixed and declining. PMS fees, especially performance fees, can spike in good years.

You're building wealth systematically. The ₹31,000 crore monthly SIP infrastructure that mutual funds offer is unmatched. There's no PMS equivalent of a ₹500 monthly SIP.

India's mutual fund industry has genuinely democratised investing. From 26.12 crore folios to record SIP inflows of ₹31,002 crore in December 2025 alone — this is a success story that PMS cannot replicate for the mass market.

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Part 6: When PMS Becomes the Rational Choice

PMS makes sense when:

Your investable equity surplus exceeds ₹50 lakh and you've already built a mutual fund base.

You understand that drawdowns are the price of alpha. The same concentration that enables 25-30% CAGR over a decade can cause 12-15% underperformance in any given year — as CY 2025 demonstrated.

You want tax optimisation. With ₹1 crore+ portfolios, stock-level tax loss harvesting becomes meaningful.

You want allocation flexibility. PMS strategies — especially multi-asset ones — can go from 0% to 100% equity, hold cash, add gold or debt, without SEBI's mutual fund categorisation constraints. CY 2025 proved this matters: multi-asset PMS averaged +9.62% while equity PMS averaged +0.25%.

You need customisation. Religious restrictions, sector exclusions, or specific mandates are only possible with PMS.

You've done the manager selection work. As the data shows, the right PMS manager can create ₹2+ crore more wealth over 10 years on a ₹1 crore investment. The wrong one will destroy value after fees. With fewer than 10% of equity PMS beating the Nifty 50 in CY 2025, this isn't a decision to take lightly.

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Part 7: How to Select a PMS Manager — A Framework

Given that manager selection is the single biggest determinant of PMS outcomes, here's what to evaluate:

1. Track record through cycles. A 3-year track record in a bull market means nothing. Look for 5-7+ years that include at least one significant drawdown (2020, 2022, or the Sep 2024 – Mar 2025 correction).

2. Risk-adjusted returns, not absolute returns. The Information Ratio (alpha per unit of tracking error) separates skill from luck. An IR above 0.5 over 5 years is genuinely good.

3. Drawdown behaviour. How much did the PMS fall relative to benchmark in the worst months? A PMS that fell 20% when the market fell 15% has a different risk profile than one that fell 8%.

4. Consistency, not just peaks. CY 2025 is a perfect example. Many top CY 2024 performers turned negative in CY 2025. Look for strategies that rank in the top half across multiple years — not just the top in any single year.

5. Asset allocation approach. Pure equity PMS strategies are at the mercy of market cycles. Multi-asset strategies that can dynamically shift between equity, gold, and debt showed their value in CY 2025 — averaging +9.62% while equity PMS averaged +0.25%.

6. Fee structure alignment. Performance-only fee structures align manager incentives with investor outcomes. Fixed-only models can reward mediocrity.

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Where Grey Sky Capital Fits

Our Smart Core Portfolio approaches this differently from most PMS strategies:

Multi-asset, not equity-only. We dynamically allocate between equity, gold, and debt with 0-100% ranges based on quantitative signals. CY 2025 validated this approach: multi-asset PMS strategies averaged +9.62% while the average equity PMS managed just +0.25%.

Systematic, not discretionary. Every allocation decision follows a rules-based framework. No hero calls, no gut feelings. Our process removes the single biggest risk in PMS — manager behavioural error.

Drawdown controls built in. The same data that shows PMS delivers higher long-term returns also shows devastating short-term drawdowns. We believe managing the downside is as important as capturing the upside.

Performance-linked fees. We eat our own cooking. If we don't outperform, we don't charge performance fees.

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The Bottom Line

The right question isn't "PMS or Mutual Funds?" It's "Which vehicle fits my current stage?"

For investors building wealth with ₹5,000-₹50 lakh: mutual funds, unambiguously. The data shows that even average flexi cap funds compound impressively over 10+ years, and the SIP infrastructure makes disciplined investing effortless.

For investors with ₹50 lakh+ surplus who've done the homework: PMS can create meaningfully more wealth — but only if you pick the right manager and the right strategy. The 5-year data is compelling: the median equity PMS delivered 15.52% CAGR vs ~13.3% for the Nifty 50. But CY 2025 shows the other side: fewer than 10% of equity PMS beat the Nifty 50, and the average equity PMS barely broke even.

The single biggest lesson from CY 2025? Strategy type matters as much as manager selection. Multi-asset PMS, with the flexibility to allocate dynamically across asset classes, delivered nearly 10x the returns of the average equity-only PMS. In a world of unpredictable markets, that flexibility isn't a nice-to-have — it's the edge.

The data doesn't lie. Both vehicles work. The choice depends on where you are, how much you have, and how much homework you're willing to do.

Choose wisely.

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Shobhit Agarwal is the Founder & CIO of Grey Sky Capital, a SEBI-registered Portfolio Management Service (INP000009694). Views expressed are personal.

Data sources cited in this article: SEBI Report of Portfolio Managers (Dec 31, 2025), AMFI (Dec 2025), Grey Sky Capital PMS Performance Monitor (Dec 31, 2025 — analysis of 1,257 PMS strategies), PMS Bazaar (10-Year Review July 2024, PMS vs MF Study Dec 2023), Ace Mutual Fund via Outlook Money (Dec 30, 2025), BW Businessworld (CY 2025 Index Returns).

Investment in securities market is subject to market risks. Read all related documents carefully before investing. Past performance is not indicative of future returns.

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