The Securities and Exchange Board of India (Sebi) mandates PMS managers to track the performance of their schemes against a benchmark index like the Nifty 50 or the Sensex. The comparison appears on their websites, fact sheets and investor presentations. For every such comparison, the PMS must pay an annual benchmarking fee to the exchange that runs the index.
The Association of Portfolio Managers of India (APMI) raised the matter with Sebi chairman Tuhin Kanta Pandey at a 12 November meeting, the people cited above said on the condition of anonymity.
“Some PMSs within the industry have argued that there is no need to pay just to use the value of the benchmark index as it is public information,” one of the four people said. The charges, set at around ₹1 lakh a year, may be small for large PMS firms but pinch the smaller ones.
PMS managers with multiple schemes pay out more, since benchmarking every new scheme, which mostly has a different benchmark, means an additional fee.
Sagar Lele, executive director at Paterson PMS said costs add up because a PMS may have different strategies which need different benchmarks. “We have a large-cap scheme, a mid-cap scheme and a small-cap scheme—each has to use the appropriate benchmark,” he said.
Queries emailed to Sebi, NSE, BSE and APMI remained unanswered.
India had 472 registered PMSs as of March 2025, and assuming each pays for just one scheme, the total benchmarking fees add up to ₹4.72 crore. The payout is likely more, given the number of “strategies” different PMS players have. In PMS parlance, a strategy is equivalent to a scheme in a mutual fund.
To be sure, mutual funds also pay a fee to use a benchmark index; however, experts argue that mutual funds command much higher assets than PMS schemes. The smallest mutual fund has an AUM of ₹173 crore, while the smallest PMS has an AUM of ₹1 crore as of October end, shows from APMI and Value Research, a mutual fund database.
Compliance cost up
For small PMS players managing ₹50-100 crore, even a couple of lakh rupees can pinch because of the lower income they earn, said Rajkumar Singhal, CEO at Quest Investment Managers.
Mint reported in August that the PMS industry, once known for its light-touch regulation, is increasingly facing significantly higher compliance demands. Over the past year and a half, PMS providers have been required to submit as many as 12 reports a month to Sebi, covering quantitative information like client information, transaction details, expense and employee roles, besides routine monthly reports to the regulator and APMI.
According to fund managers, it takes assets of around ₹150 crore for a PMS to break even. For instance, a portfolio manager earns around 2% fee annually on the ₹150 crore AUM — that is, ₹3 crore. This is used to pay custodian and fund accounting costs, technology plus software costs, and salaries, besides compliance costs.
If APMI could collect a lower fee from all the PMSs to get access to the benchmarks, that would be reasonable, suggested Vijay Bharadia, founder and chief investment officer at Wallfort PMS. “Democratizing the cost of access to benchmark data through the APMI platform will not only support new or smaller players but also help existing PMS providers deliver services more cost-effectively,” he said.
As of 30 September, the AUM of the PMS industry (non-EPFO) stood at ₹8.37 trillion, growing 12% year-on-year, Sebi data showed.
An executive from one of the stock exchanges, however, believes Sebi is unlikely to take up issues related to how products are priced by the exchanges. The executive declined to be named.
Emails sent to Sebi, NSE, and BSE remained unanswered at the time of publishing this story.
