Top PMS funds have consistently outperformed the benchmark indices over the past decade, showcasing the effectiveness of active management.
The top 10 Portfolio Management Services (PMS) in the past 10 years (until July 2024) have outperformed the benchmark index Nifty 50 by achieving a Compound Annual Growth Rate (CAGR) exceeding 20% over the past decade. This highlights the effectiveness of active fund management in navigating market volatility and delivering superior returns. Even the average return of 60 equity PMSes within the PMS Bazaar universe (with a track record of 10 years) stands at a remarkable 17.35%.
The Indian equity markets have faced a rollercoaster ride from 2014 to 2024, marked by significant events like demonetisation, the COVID-19 pandemic, and the Russia-Ukraine conflict. Despite these challenges and global economic uncertainties, the Nifty index has shown resilience delivering a CAGR of 12.44% in the past 10 years (until July 2024), reflecting a robust underlying economic structure. The BSE 500 index has also exhibited strong growth, with a CAGR of 14.22%.
PMS Performance
As of July 2024, out of 408 investment approaches within the PMS Bazaar universe, 60 equity PMS strategies have a track record of over 10 years, with an average return of 17.35%. In comparison, the BSE 500 TRI and NIFTY 50 TRI delivered returns of 15.67% and 13.80%, respectively, over the same period.
For the investors who committed Rs 50 lakh to PMS a decade ago, their investments would have grown 5-fold, reaching approximately Rs 2.5 crore. In contrast, the same investment in the benchmark indices would have yielded nearly Rs 2 crore.
List of top 10 PMS in 10 years
Aequitas Investment Consultancy’s India Opportunities Product (Small Cap) stands out as the top performer, delivering a remarkable 29.58% return. In the tenth position is Care Portfolio Managers’ Growth Plus Value (Small & Mid Cap) with a return of 20.54%.
The range of returns, spanning from 20.54% to 29.58%, underscores the robust performance across various categories, including Small Cap, Mid Cap, Multicap, and Small & Mid Cap.
As mentioned, PMS investment approaches, known for their active management, employ a structured approach to stock selection. This involves setting specific criteria for entering and exiting positions within a year or over the years, a strategy aimed at outperforming the market or generating alpha. As explained by Siddharth Bhaiya from Aequitas Investment Consultancy Pvt Ltd, this disciplined process is a key factor in delivering superior returns for PMS investors.
He said, “Our results are a byproduct of us following our research process to the ‘T’ and not letting ourselves get distracted from the noise around. We follow a single strategy, i.e., a multi-bagger strategy: a combination of Value, Growth, and Contrarian investing. Our philosophy allows us to invest in businesses that are leaders in beaten-down and under-invested sectors, allowing us to buy with a high margin of safety.” He further stated, “Investing with a long-term view, we do not often churn our portfolio and stay invested until the valuations run out of whack, consequently leading to multi-bagger returns.”
As such, each fund manager has a different style of investing (value, growth, thematic, momentum etc) that not only affects the stock-picking processes but also the holding period of the stocks.
Arpit Shah, Care Portfolio Managers Pvt Ltd was able to navigate volatility in the market in the past 10 years with high-conviction investments into small cap stocks. He explains, "Over the past decade, we’ve consistently maintained a 70%+ exposure to small-cap companies, at times reaching as high as 85%. Our focus has always been on identifying potential multi-baggers with strong growth stories and favourable risk-reward ratios. By concentrating on high-conviction stocks, with over 50% in our top 5 holdings, we’ve navigated volatility during corrections, particularly during mutual funds’ market cap reclassification. However, this same small-cap exposure has been a significant driver of outperformance during bull-markets."
Takeaway
The remarkable performance of the top 10 PMS funds, achieving over 20% CAGR over the past decade, underscores the strategic advantage of expert portfolio management. These funds have adeptly navigated significant market challenges from economic disruptions to geopolitical events demonstrating their resilience and ability to consistently outperform benchmark indices.
This is proof that long-term wealth creation and capital preservation work. That said, it is better to check with a financial advisor for better financial planning and wealth creation strategies. These PMSes are for informational purposes only and are not to be taken as recommendations.
