PMS asset base rises 15% at June end; What it indicates about retail investors confidence in equities?

With investors looking at options beyond the traditional investment avenues for higher risk-adjusted returns, assets under management of the portfolio management industry rose 15 percent in the last one year to nearly Rs 25 lakh crore at June end.

Going ahead, the trend looks positive for the ongoing fiscal year with portfolio management services (PMSs) getting acceptability by a wider customer segment, including retail, experts said.

"Given India's high growth and young population, the same factors will continue to drive growth going forward. There is still a significant runway for growth, given India's under-penetration of financial assets relative to other developed and developing economies," Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth, said.

The uptick in demand largely will be on account of unique products, transparency in fund management and higher market penetration, Nitin Rao, Head of Products and Proposition, at Epsilon Money Mart, said.

Assets under management (AUM) of the portfolio management industry rose to Rs 24.81 lakh crore at the end of June 2022 from Rs 21.55 lakh crore at the end of June last year, translating into a growth of 15 per cent, data with markets regulator Securities and Exchange Board of India (Sebi) showed.

The asset base was Rs 24.3 lakh crore at the end of May this year.

Of the total AUM, Rs 18.3 lakh crore are contributed by funds from EPFO or PFs.

As of June 2022, there were 1,43,579 clients in the portfolio management industry, of which 1,34,618 clients were in the discretionary services category, 7,073 clients in the non-discretionary services category and 1,882 clients availed advisory services of portfolio managers.

The reasons for growth in the AUM are more structural like the increase in the middle-class population, increase in financial savings, relative unattractiveness of traditional asset classes like real estate and bank deposits, and awareness campaigns run by the industry in the past few years, Jeloka of Sanctum Wealth said.

In addition, the returns have been satisfactory in the last decade, which has cemented the confidence of retail investors in equities, he added.

Epsilon Money Mart's Rao said that investors are looking at options beyond the traditional investment avenues for higher risk-adjusted returns. Over the last couple of years, PMS AUM has witnessed significant growth supported by differentiating strategies and developments in regulations as well.

Experts believe that PMS is emerging as a strong alternative to grow wealth and investment.

In addition, several PMS schemes have done better than mutual funds, which have attracted interest from investors. Further, PMS is on a smaller base as compared to mutual funds, Anil Rego, Founder and fund manager, Right Horizons, a Sebi-registered portfolio management services, said.

According to Rego, relative performance compared to mutual funds will continue to drive the growth of the PMS industry. PMSs benefit from greater flexibility compared to mutual funds after Sebi tightened the categories and definitions. This also helps them deliver a superior return and allows them to move between categories based on the market outlook.

"PMSs should also benefit from continued EPFO flows. Globally also, Separately Managed Accounts (SMAs) under which category PMSs fall, have seen a strong growth relative to pooled accounts," he said.

However, if PMS schemes take a very high risk and investors see high volatility, it could impact the industry adversely, especially during/after steeper market corrections, he added.