Portfolio management industry to expand, asset base to grow 25%: Experts

Rise in high net-worth individuals and their need for diversification beyond traditional investment products contributed to a 15 per cent year-on-year gain in the asset base of portfolio management services to Rs 28.5 trillion at June-end, experts said.

The industry is further expected to grow at 20-25 per cent over the next 3-5 years, they said.

Additionally, the customised nature of PMS (portfolio management scheme) services and an evolving regulatory landscape that fosters trust and innovation also helped in the growth of the industry.

This growth is not just limited to assets, the clientele base has also expanded.

The number of PMS clients in the country surged to 2.8 lakh by June, reflecting a 10 per cent growth from the preceding year, industry data showed.

Delving deeper into the numbers, the average ticket size for PMS clients in the country stood at an impressive Rs 10 crore. This indicates the significant trust and capital that investors are placing in PMS, Sonam Srivastava, Founder and Fund Manager at Wright Research (PMS), said.

"Dominance in the industry is evident, with the top 10 PMS providers holding sway over 60 per cent of the total AUM, showcasing their significant influence and market share," she added.

Portfolio managers (PMs) cater to the needs of high-net-worth individuals (HNIs) who seek customized and well-diversified investment portfolios.

Going by Sebi data, assets under management (AUM) of the portfolio management industry stood at Rs 28.50 lakh crore at the end of June, as compared to Rs 28.07 lakh crore at the end of the preceding month. On a year-on-year basis, the total assets managed by PMs increased by 14.81 per cent.

This growth is underpinned by the increasing wealth of the Indian populace, the rise in high-net-worth individuals, and an evolving regulatory landscape that fosters trust and innovation, Srivastava said.

The assets managed by portfolio managers have been steadily rising during the last five years to Rs 27.9 lakh crore by the end of 2022-23.

"Factors such as availability of information in an organized manner, deepening distribution reach of portfolio managers, product differentiation and perceived possibility of higher returns, attracted huge flows in various portfolio management strategies over the last few years," Roopali Prabhu, Head of Products and Solutions, Sanctum Wealth, said.

Looking ahead, the horizon seems promising for the PMS industry in the coming years with an increasing number of HNIs in the country and hope for superior returns on investment portfolios.

"With projections indicating a consistent Compound Annual Growth Rate (CAGR) of 15 per cent over the ensuing years, the industry is poised for sustained growth and expansion," Srivastava said.

"We are seeing a significant expansion considering our performance. We expect the industry to grow at 20-25 per cent over the next 3-5 years," Divam Sharma, Founder and Fund Manager at Green Portfolio (PMS), said.

He said that the industry is witnessing enhanced awareness and interest levels from first-time PMS investors. Also, UHNI's and Family Offices are increasing allocations towards better-performing PMSs as they foresee brighter prospects in markets than in other asset classes.

According to a report by Knight Frank, the Indian high-net-worth individual (HNI) population, with an asset value of USD 1 million or more, was recorded at 7.97 lakh in 2022 and will rise to 16.57 lakh by 2027.

In 2022-23, new registrations were granted to 53 portfolio managers by the Securities and Exchange Board of India (Sebi).

To improve resilience and transparency regarding portfolio managers, Sebi specified cyber security and cyber resilience framework, issued guidelines regarding performance benchmarking and valuation norms, prudential limits for related party investments and came out with measures to strengthen the systems of the portfolio managers.

In addition to these initiatives, Sebi is exploring standardization of disclosures by portfolio managers.