PMS Selection Criteria: Checklist Before You Allocate
PMS selection criteria are the checks you run before you hand a SEBI-registered portfolio manager a demat mandate – usually at the onshore minimum ticket level commonly discussed from ₹50 lakh (confirm the current SEBI floor and that strategy’s own minimum).
Past-year return tables are marketing, not diligence. A useful PMS selection criteria process asks whether the mandate fits your risk, whether drawdowns were survivable, whether fees align, and whether operations and reporting will let you stay invested through a bad year.
This page is the allocator checklist. For strategy-type reading without a fake “best PMS” ranking, use Top Performing PMS Strategies. For product basics, start at the PMS hub.
Quick answer: PMS selection criteria that matter
| Check | What “good enough” looks like |
|---|---|
| Registration | Active SEBI portfolio-manager registration; disclosure document available |
| Mandate fit | Style, market-cap, concentration, and derivatives policy match your intent |
| Process | Clear buy/sell rules; not only a star PM story |
| Risk | Max drawdown and recovery explained over a full cycle – not only CAGR |
| Fees | Management + any performance fee, hurdle/high-water language as written |
| Ops | Reporting frequency, corporate actions, exit/load, PoA scope |
If any row fails, do not “fix it after allotment.”
Why PMS selection criteria exist
A PMS holds stocks (or other permitted securities) in your demat under a management agreement. You get concentration and customisation that many mutual funds will not offer – and you take manager risk, liquidity path risk, and fee drag personally. PMS vs AIF is a different product choice; run that decision before you deep-dive one PMS house.
How money moves in a PMS
- Eligibility / ticket – meet the applicable SEBI minimum and the strategy’s own floor.
- Onboarding – KYC, agreement, Power of Attorney scope, demat/bank linkage.
- Funding – cash or stock transfer as the product allows.
- Management – discretionary (most common), non-discretionary, or advisory – know which you signed.
- Reporting / fees – periodic statements; fees as per the agreement.
- Exit – notice, liquidation path, and any exit load as disclosed.
Map that path before you compare return slides.
PMS selection criteria checklist (copy this)
1. Manager and governance
- SEBI registration status current (verify via official SEBI intermediary records / disclosure docs)
- Team depth beyond one named PM; succession language if the star leaves
- Skin in the game disclosed where claimed – ask for what is actually invested
- Related-party and conflict disclosures in the disclosure document
2. Strategy and mandate fit
- Written mandate: growth / value / quality / momentum / multi-cap / mid-small, etc.
- Typical holdings count and max single-stock weight
- Cash policy and derivatives use (if any)
- Capacity: especially for mid/small strategies – what happens when AUM grows
Cross-check style labels against the strategy guide: top PMS strategies framing.
3. Risk and performance reading
- Prefer rolling multi-year windows over one-year rank lists
- Ask for max drawdown and time to recover in the manager’s worst period they will disclose
- Benchmark must match the universe (mid-cap vs mid-cap index – not a large-cap index used to flatter)
- Separate live track record from model/backtest slides
Do not invent target IRRs. Use only numbers the manager documents for that strategy.
4. Fees and alignment
- Fixed management fee base and any performance fee
- Hurdle, high-water mark, catch-up – only as written
- Other costs (brokerage, GST where applicable, custody) called out
- Soft reading: fee math changes net outcomes even when headline % looks familiar – see also PMS fee structure if you need a fee primer
Never assume a “market standard” fee from a blog.
5. Operations and client experience
- Reporting pack: holdings, transactions, fees, benchmarks
- Exit notice and how securities are sold or transferred
- PoA limits – what the manager can and cannot do
- Service model: who you call when markets gap
Who should use this PMS selection criteria list
- HNIs allocating at typical PMS ticket sizes with a multi-year horizon
- Family offices comparing 3-5 same-style managers before a bake-off
- Investors moving from mutual funds into concentrated demat mandates
Who should pause
- Anyone selecting only from a “top returns” WhatsApp list
- Investors who need near-term capital certainty or mutual-fund-like daily simplicity
- Readers who will not open the disclosure document and fee schedule
- Anyone uncomfortable with mark-to-market drawdowns on a concentrated book
Common mistakes
- Chasing last year’s winner across mismatched styles.
- Wrong benchmark that flatters the pitch.
- Ignoring drawdown because CAGR looks smooth.
- Fee blindness – especially performance fees without high-water clarity.
- Skipping ops – reporting and exit terms only noticed when you want out.
Portfolio fit
A PMS is usually a satellite inside public equity – size it so a deep drawdown does not force sale of core holdings. If private markets fit better, revisit PMS vs AIF before you force a PMS ticket.
Official orientation: SEBI investor page on Portfolio Management Services and the latest SEBI FAQs for Portfolio Managers. The product disclosure document remains the source of truth for any one strategy.
Frequently asked questions
What are PMS selection criteria?
PMS selection criteria are the diligence checks – mandate, manager, risk, fees, and operations – you complete before funding a portfolio management service.
Is the SEBI minimum still about ₹50 lakh?
That is the commonly discussed onshore floor; confirm the live SEBI rule and the strategy’s own minimum before you plan capital.
Should I pick the highest one-year return PMS?
No. Rank lists without style, drawdown, and fee context are a weak filter. Use the checklist above.
How many PMS managers should I compare?
Often three to five in the same style bucket. Comparing a small-cap concentrated book to a large-cap quality book teaches little.
PMS or mutual fund?
Mutual funds usually win on simplicity and lower tickets. PMS fits when you want a demat mandate, concentration, and customisation – and you accept the fee and diligence load.
Bottom line
Strong PMS selection criteria beat strong marketing charts. Verify registration, mandate fit, drawdown honesty, fee text, and exit ops – then size the sleeve so you can stay invested. Use the strategies guide for style literacy; use this page for the commit checklist.
This is educational content for sophisticated investors, not personalised advice. Rely on SEBI rules, the disclosure document, and your advisers.
