How to choose a PMS — a due-diligence checklist.
A ₹50 lakh commitment deserves better than a sales deck. The questions you ask before signing matter more than any advertised return — this is the full list, in order.
Judge every manager on the same six tests.
One great year tells you almost nothing. What separates a durable PMS from a lucky one is behaviour across full cycles, honest risk disclosure, a bench behind the star manager, a fee stack you have seen in writing, and exit terms you have actually read. Run the same checklist on every candidate and the marketing falls away.
Six checks, at a glance.
SEBI already bans upfront fees and caps exit loads — the rest is on you. Here is what a good answer and a red flag look like on each test.
| What to check | A good sign | A red flag |
|---|---|---|
| Track record | Steady through 2020 & 2022, shown as TWRR | Only the recent rally shown |
| Maximum drawdown | Shallower than peers, and recovered | Brushed aside or undisclosed |
| Concentration | Clear position & sector caps | “Trust us”, with no limits |
| Key-person risk | Research team + a succession plan | One star manager, no bench |
| Fees | Full stack in writing; direct plan offered | Vague costs, pressure, or an upfront fee |
| Benchmark | Matches the strategy's cap & style | A flattering, mismatched index |
Demand the full cycle, not the highlight reel.
Insist on seeing how the strategy behaved through the March 2020 crash and the 2022 rate-hike correction — and the recoveries that followed. SEBI requires discretionary managers to report time-weighted returns (TWRR) against an appropriate index; that format strips out the luck of cash-flow timing and shows pure managerial skill.
Prefer rolling returns over a single point-to-point CAGR — a flattering start date can make a mediocre manager look brilliant.
- A minimum of five years of TWRR data — including the drawdowns
- Rolling returns versus the benchmark, not one cherry-picked start date
- Peer comparison within the same category, not just a broad index
Drawdown, concentration, turnover.
Returns are the reward; these three numbers are the ride. Maximum drawdown is the deepest fall on record — steady compounding with a shallow drawdown usually beats a higher headline with violent swings, especially at ₹50 lakh-plus. Concentration shows how the book is built: position and sector caps tell you whether one bad call can sink the year. Turnover is how often the manager trades — high churn bleeds brokerage and short-term tax, and can signal an undisciplined process.
- Worst drawdown — how deep, and how long the recovery took
- Largest single-stock position and top-10 concentration
- Sector limits and how widely the book is spread
- Annual portfolio turnover, and the cost + tax friction it creates
One star manager is a feature — and a fragility.
Many Indian PMS strategies are built around a single name. That keeps the thinking accountable, but it also hangs your outcome on one person. Asking what happens if they leave is not rude — it is diligence.
Look for a real research bench, a written investment process, and a stated succession plan. Firms where the philosophy lives in the institution, not one head, age better over a 5–10 year holding period.
Get the full fee stack — in writing.
The management fee is only the visible layer. Fixed plans run up to about 2.5% a year; performance plans take 10–20% of gains above a hurdle, with a mandatory high-water mark so you never pay twice on the same recovery. Underneath sit brokerage at actuals, custodian charges, other operating costs (SEBI-capped at 0.50% of average AUM) — and 18% GST on the fees themselves.
SEBI bans upfront fees entirely, caps exit loads at 3-2-1% over the first three years, and requires a direct on-boarding option. Ask for the whole stack modelled on your ticket size — one all-in annual number. For the worked maths, see PMS fees & costs.
- Fee model — fixed, performance or hybrid — and the exact hurdle
- High-water mark confirmed in the documentation
- Brokerage, custodian, operating expenses (capped at 0.50% of AUM) + 18% GST
- The exit-load schedule, and whether direct on-boarding is offered
- One number: the full estimated annual cost on your ticket size
The index must match the mandate.
A mid-cap book measured against a large-cap index flatters itself. SEBI now ties each strategy to a stated benchmark category — verify it mirrors where the money actually sits. On the way out: your shares stay in your own demat throughout, but confirm the notice period, liquidation speed and where you sit on the exit-load taper. Clean exit terms are a manager telling you they expect you to stay by choice.
Cut through sales bias with one score.
Every deck you are shown was made by the seller. The Nyra Score grades all 768 strategies we track on the same seven pillars — returns, risk, manager tenure, fees, concentration, transparency, AUM fit — so the first cut is evidence, not polish. Build the shortlist there, then run this checklist on the finalists before you ever sit with a manager.
Choosing a PMS, answered.
What is the most important thing to check before choosing a PMS?
Performance across full market cycles — including the 2020 crash and the 2022 correction — reported as TWRR against a fair benchmark. Consistency and downside behaviour tell you more than any single strong year.
What is a maximum drawdown and why does it matter?
It is the deepest peak-to-trough fall the portfolio has suffered — the pain endured to earn the advertised return. A modest drawdown with steady compounding usually suits a ₹50 lakh-plus cheque better than a higher headline return with violent falls.
What does a high-water mark mean in PMS fees?
The performance fee applies only to gains above the portfolio's previous peak. If the portfolio falls and then recovers, the manager earns nothing on the recovery until it climbs past the old high — so you never pay twice on the same rupee of profit.
Can a PMS charge an upfront fee or a large exit load?
No upfront fees — SEBI prohibits them. Exit loads are capped at 3% in year one, 2% in year two, 1% in year three and nil after. Direct on-boarding (without a distributor) must also be available, carrying only statutory charges.
How is a single-manager PMS a risk, and what should I ask?
Many Indian strategies revolve around one star manager — accountable, but fragile. Ask who runs the research desk, whether the process is written down, and what happens to your mandate if the key person leaves.
How does an independent Nyra Score help me choose?
It grades every strategy on the same evidence — risk-adjusted returns, drawdown, consistency, fees — so you can compare managers without the sales deck. Use it to build the shortlist, then run this checklist on the finalists.
Keep reading.
Build the shortlist on evidence, then run the checklist.
Educational content only — not investment advice. Figures reflect SEBI rules current to 2025-26 and may change; verify specifics before acting. PMS, AIF & GIFT City investments are subject to market risks; past performance is not indicative of future returns.