Alternative portfolio growth

Within a few days, there was a mix of good news, bad news, and policy-related demands related to the country’s Portfolio Management Services (PMS). It showed the differences between past performances, immediate concerns, and future landscape. The good news stems from how PMS has grown over the years. The bad news came from a cautious approach, even a scared one. The policy screams highlighted the possible need to revamp a few rules and laws to give a further fillip to the segment in the future.

Let us start with the good news. India’s alternative investment landscape has reached a pivotal moment, with PMS, and Alternative Investment Funds (AIFs) together surpassing Rs23 lakh crore in assets as of September 2025. Data compiled by PMS Bazaar shows that the past decade transformed the segments from being niche and limited to turning into a central pillar of portfolio construction for rich, affluent, and sophisticated investors.

The recent report underscores the structural shift underway in Indian investing, and highlights the role that alternatives play in asset allocation. Over the past 10 years, the combined alternatives space has delivered a remarkable 31.24 per cent compounded annual growth rate, as the assets rose sharply from Rs1.54 lakh crore to more than Rs23 lakh crore. This dramatic scale-up comes during a period of global volatility, where investors have increasingly looked to asset classes beyond conventional equity and fixed income. The preference for uncorrelated, alpha-focused strategies is now visibly reshaping portfolios across the wealth tiers.

A day after this report hogged the headlines, came the data that PMS “recorded its sharpest monthly decline of FY26 in September, with net inflows plunging 92 per cent to just Rs1,139 crore, compared with Rs14,789 crore in August.” There was a positive inflow during September but the figure was way lower than the previous month. One of the major reasons was the decline in discretionary PMS, the “clearest gauge of HNI (high net worth) sentiment,” which “saw a sharp deterioration.” Inflows declined to just over Rs19,000 crore from nearly Rs34,000 crore over the two months.

In a bid to make PMS more attractive in the long run, rather than tackle the short-term crises, PMS managers want the stock market regulator, SEBI, to either reduce or remove the fees that they pay for every index that they benchmark against. The regulator mandates that the performances of the PMS schemes are compared to umbrella overall indices like the Nifty or Sensex. According to the managers, the benchmark index data is public information, and there is no need to pay fees for it. In addition, it is a burden on small firms.

However, in a positive note, SEBI recently allowed the transfer of PMS businesses, which need to be concluded within two months of the regulator’s approval. In case the transfer is between different groups, each party needs approval from SEBI, and the entire PMS business needs to be transferred. This is a huge boon for the segment, and allows greater flexibility. Ironically, a restriction on mutual funds has enhanced PMS’ appetite for IPOs. SEBI banned mutual funds from IPO deals, which goaded PMS to spend more on pre-IPO purchases, and those of unlisted shares.

According to a media report, “With MFs now restricted to the anchor and regular institutional quota of IPOs, PMS and AIFs have been left with a clearer runway to build pre-listing positions, and the timing could not be more opportune. The primary market is in full swing, with strong oversubscriptions, blockbuster listings, and a growing pipeline of new-age and manufacturing companies.” However, some of the recent listings were feeble, there is a growing concern about IPO valuations, and many past IPOs are quoted at discounts.

Over the past decade, according to PMS Bazaar data, the assets under management of PMS schemes that cover discretionary and non-discretionary mandates (excluding co-investments and advisory assets) grew from Rs1.27 lakh crore in September 2015 to Rs8.37 lakh crore in September 2025, marking a 10-year compounded growth of 20.75 per cent. This surge reflects a deeper maturation of the wealth ecosystem. The number of SEBI-registered portfolio managers climbed to 495, indicating more players and strategies that serve a growing set of HNIs, corporates, and others.

If PMS expanded steadily, the AIF segment grew exponentially. AIF commitments leapt from Rs27,484 crore in September 2015 to Rs15.05 lakh crore in September 2025, which translates into an extraordinary compounded growth of 49.23 per cent. Within the AIF universe, Category II AIFs, which constitute roughly 75 per cent of commitments, have been the biggest contributors. Commitments in this category soared from Rs14,707 crore to Rs11,20,589 crore, delivering a staggering 54.24 per cent compounded growth.

India has 1,699 registered AIFs (as on Nov 17, 2025) across categories, highlighting the depth, sophistication, and diversification now available to domestic capital. Commenting on the transformation, R Pallavarajan, founder and director, PMS Bazaar, said: “India’s ultra-rich and HNI investors are rapidly increasing, and seeking diversification, and reliable sources of alpha. PMS and AIF platforms allow them to access conviction-led, strategy-driven portfolios that are built for today’s complex market environment. The rise of alternatives is not incidental; it reflects a conscious and sophisticated move toward performance-oriented investing.”

Offering an industry perspective, George Heber Joseph, CIO and CEO (Equity), ASK Investment Managers, noted: “Rising interest in PMS and AIF products shows that India’s HNI and UHNI investors are increasingly seeking research-backed, structured solutions to diversify and grow their wealth. This surge is also driven by new-age investors, startup founders, senior professionals, and growing participation from Tier II and III cities, supported by strong on-ground relationship managers.” India wants to become rich fast.

He added: “India’s alternatives market is expanding rapidly, powered by a larger affluent base, clearer regulations, deeper institutional involvement, and the gradual globalisation of capital markets. PMS and AIFs are no longer niche (segments); they are emerging as the next frontier of professional investment management. The data is clear; India’s alternative growth story has only just begun."

India’s alternatives boom is being steered by rising affluence, sharper regulatory clarity, globalized capital flows and increasing institutional engagement. PMS and AIFs, once peripheral, are now central to long-term wealth creation strategies. With data indicating that the uptrend is in the early stages, India’s alternative investment revolution appears poised for an even stronger decade ahead.