PMS Returns Turn Negative as Market Skew Hits ICICI Prudential and ASK Portfolios

PMS Funds Deliver Negative Returns as Market Volatility Hits ICICI Prudential Multi-Cap Strategies

India’s portfolio management service (PMS) providers have struggled to deliver gains over the past year as uneven market trends and foreign investor withdrawals weighed heavily on performance. Despite the near-term weakness, the longer-term track record of many strategies remains robust, underscoring the resilience of disciplined investing through cycles.

According to data from PMSBazaar, some of the country’s largest PMS schemes — including ICICI Prudential PMS Contra Strategy and ASK India Entrepreneurs Portfolio — recorded absolute negative returns of 3 percent and 9 percent, respectively, in the one-year period ended September 2025. These strategies, with assets under management (AUM) of ₹12,110 crore and ₹10,484 crore, follow multi-cap and flexi-cap models designed to deliver balanced exposure across market segments.

Short-Term Losses, Long-Term Strength

While the past year has been turbulent, both portfolios have demonstrated strong performance over a five-year horizon. The ICICI Prudential PMS Contra Strategy delivered a 28 percent compounded annual growth rate (CAGR) over five years, while the ASK India Entrepreneurs Portfolio generated 14 percent CAGR during the same period.

A similar pattern emerged across other top PMS managers. The White Oak Capital Management India Pioneers Equity and ValueQuest Platinum Scheme, which also follow multi-cap and flexi-cap strategies, posted negative one-year returns of 5 percent and 13 percent, respectively. Yet, over the five-year period, they managed to generate 16 percent and 19 percent CAGR, highlighting the importance of staying invested during volatility.

The Marcellus Investment Managers Consistent Compounders Strategy, which focuses on quality large-cap companies, delivered a negative 11 percent return over the past year, but posted 13 percent CAGR over five years.

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Small-Cap Resilience Amid Broader Weakness

Interestingly, small-cap-oriented PMS strategies performed far better despite the overall market correction. The Aequitas Investment India Opportunities Product, which primarily focuses on smaller companies with strong growth potential, reported 25 percent and 32 percent returns over three-year and five-year periods, respectively. The strategy, managing ₹3,826 crore in AUM, benefited from selective exposure to niche, high-growth sectors.

Market experts suggest that the small-cap rally earlier this year was concentrated in momentum and high-beta segments, areas that many conservative PMS portfolios consciously avoided due to their higher risk profiles.

Fund Managers Cite Valuation Compression and Macro Uncertainty

George Heber Joseph, CIO and CEO (Equity) at ASK Investment Managers, attributed the recent underperformance to global headwinds and sectoral distortions.

“The short-term underperformance can be attributed to the sharp rally in lower-quality, high-beta, and momentum-driven segments, which we consciously avoid given our focus on business quality and earnings durability,” Joseph said.

He added that temporary valuation compression in high-quality stocks—particularly within consumer and financial sectors—also dragged performance. Sustained foreign institutional investor (FII) selling further pressured these fundamentally strong segments.

Despite the temporary setbacks, ASK continues to hold a constructive long-term outlook, focusing on high-quality businesses capable of compounding earnings over time.

Experts See Brighter Prospects for FY26

While FY25 has been challenging, PMS managers expect a meaningful turnaround in the next 12 months.

Prabhakar Kudva, Director and Principal Officer at Samvitti Capital PMS, believes the worst is over for Indian equities.

“The next one year should be significantly better than the last, as many global challenges — including tariffs, trade disputes, and geopolitical conflicts — are moving toward resolution,” Kudva said.

He noted that India was among the worst-performing markets globally over the last year, setting the stage for a cyclical rebound. Kudva added that PMS products tend to outperform mutual funds during bull markets but lag during corrections due to their aggressive exposure to mid- and small-cap stocks.

PMS vs Mutual Funds: Competitive Yet Complementary

Kudva also pointed out the growing interest in Specialised Investment Funds (SIFs) offered by mutual funds, which use hedging strategies through derivatives to limit downside risks.

“SIFs are structured differently — they’re partially hedged to reduce losses during bear markets. While they offer some protection, they’re not direct competitors to PMS products, which aim for higher alpha through active stock selection,” Kudva explained.

Analysts suggest that PMS investors typically have higher risk tolerance and longer investment horizons, which allows these products to recover faster once markets stabilize.

Cautious Optimism Ahead

Despite the current volatility, the outlook for PMS investors remains cautiously optimistic. Market experts believe that as interest rates stabilize, election-related uncertainty fades, and corporate earnings strengthen, PMS portfolios will likely benefit from earnings-led growth rather than sentiment-driven movements.

PMS providers are expected to continue emphasizing bottom-up stock picking, quality bias, and disciplined risk management, even if short-term momentum remains skewed toward speculative themes.

For long-term investors, the recent correction offers an opportunity to accumulate quality portfolios at more reasonable valuations. The broader consensus among fund managers is clear — the underperformance is cyclical, not structural.

Conclusion

The recent slump in PMS performance serves as a reminder that even the best-managed portfolios are not immune to market turbulence. However, the consistent five-year record of leading PMS strategies underscores the value of patience and disciplined investing.

As markets prepare for a recovery phase, fund managers are betting that the coming year will favor fundamentals over frenzy, paving the way for PMS strategies to regain their shine in India’s evolving investment landscape.

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