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Debt PMS Surges Among HNIs - Are Investors Really Paying More for Customisation than Mutual Funds?

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  Published in Business and Finance on Friday, November 21st 2025 at 6:13 GMT by Business Today

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Debt PMS Surges Among HNIs – Are Investors Really Paying More for Customisation than Mutual Funds?
(Business Today – 21 Nov 2025)

In the past few years, a noticeable shift has taken place in the Indian wealth‑management arena. High‑net‑worth individuals (HNIs) who have traditionally relied on mutual funds and exchange‑traded funds (ETFs) are increasingly turning to Private Market Solutions (PMS)—especially debt‑focused PMS—to meet their investment objectives. Business Today’s latest analysis, drawing on recent data and interviews with industry insiders, provides a detailed look at why this trend is gaining momentum, how the cost of customisation compares to that of off‑the‑shelf mutual funds, and what it means for investors and the broader market.

What is Debt PMS?

A Private Market Solution is a tailor‑made portfolio managed by a registered asset‑management company (AMC) under SEBI’s PMS regulations. Unlike mutual funds, which are structured for a broad investor base and must adhere to prescribed asset‑allocation mandates, PMS allows investors to: - Specify a target risk‑return profile, - Set concentration limits, - Choose preferred credit quality or sector exposures, and - Receive personalised reports and strategy discussions.

Debt PMS, in particular, focuses on fixed‑income instruments—government securities, corporate bonds, tax‑exempt instruments, and sometimes structured debt—offering a range of duration and risk‑adjusted strategies.

The Surge: Numbers Behind the Trend

Business Today's research shows that the number of HNIs investing in debt PMS has tripled over the last 18 months. The article cites data from the Asset‑Management Companies Association of India (AMC‑A) indicating that total assets under PMS in the debt space rose from ₹8 trillion in September 2023 to ₹24 trillion by the close of 2025. This growth outpaced the roughly 10 % annual increase in debt mutual fund assets over the same period.

The surge is not limited to a single segment of the HNI population. The article highlights that: - Ultra‑wealthy investors (those with assets over ₹1 trillion) now allocate 15–20 % of their fixed‑income portfolio to debt PMS, - Emerging HNIs (assets ₹250 cr‑₹1 trillion) have increased their PMS holdings from 5 % to 12 % of their total debt allocation, - Cross‑border investors in India have also shown interest, citing the flexible tax‑planning possibilities that PMS offers.

Customisation vs. Mutual Funds: The Core Debate

Fee Structures

One of the most frequently raised questions is whether the premium cost of PMS truly translates into higher returns. Business Today dissects the fee layers:

While the base asset‑management charge of a debt PMS is roughly double that of a mutual fund, Business Today's analysis indicates that the net out‑performance of customized debt portfolios over benchmark indices averages 0.6 % – 0.8 % higher on an annual basis—after factoring in the fees.

Risk–Return Profile

PMS offers investors the ability to adjust duration and credit exposure in line with macro‑economic forecasts and personal risk tolerance. For instance, a client anticipating a 5‑year rise in interest rates might choose a PMS that limits duration to 3 years and focuses on AAA‑rated corporate bonds. Conversely, a bullish view on corporate earnings could lead to a higher‑yield, slightly riskier portfolio.

Business Today’s case studies illustrate that: - PMS clients who followed a short‑duration, high‑credit strategy saw a 1.2 % yield spread over the same period as the broad Nifty 10 Year benchmark, - Those who opted for long‑duration, lower‑credit portfolios faced a 0.4 % yield lag but achieved lower volatility.

By contrast, mutual funds—particularly diversified debt funds—are constrained by portfolio‑size limits and broader risk‑management mandates, often resulting in less flexibility to respond to fleeting market signals.

Liquidity Considerations

Mutual funds typically provide daily liquidity, while PMS may have shorter (2‑3 days) or longer (up to 5 days) redemption windows, depending on the manager’s policy. Business Today’s survey of HNIs points out that many investors are comfortable with slightly reduced liquidity in exchange for the customised exposure they value. However, the article notes that liquidity can become a constraint when investors seek large‑scale exit at times of market stress.

Regulatory & Compliance Landscape

SEBI’s 2024 guidelines on PMS have clarified several points that affect fee transparency and investor protection:

1. Fee Disclosure – PMS managers must publish a detailed fee schedule (including performance and transaction charges) on a dedicated website, ensuring investors can compare costs before investing.
2. KYC & Suitability – PMS accounts require a higher KYC threshold, and AMCs must document the suitability of each strategy for the investor’s profile.
3. Liquidity Reporting – Managers must disclose projected liquidity profiles quarterly, providing investors with an early warning of potential constraints.

Business Today cites a recent AMC‑A briefing that shows 70 % of debt PMS providers are in compliance with the new disclosures, signalling a maturing industry standard.

Macro‑Economic Context

India’s macro environment has played a pivotal role in driving the debt PMS boom:

• Rising interest rates: The Reserve Bank of India (RBI) has maintained a cautious stance on rates, making duration‑sensitive portfolios appealing. PMS managers can pivot strategies more swiftly than mutual fund managers.
• Corporate debt quality: With a significant number of corporate issuers improving credit ratings, investors are attracted to higher‑yield custom debt portfolios that can exploit these opportunities without compromising on credit risk.
• Inflation volatility: HNIs, often more risk‑averse in fixed income, seek protection through diversified custom debt strategies that incorporate inflation‑linked instruments—something mutual funds can only do to a limited extent.

Business Today references a recent RBI report noting that 10‑year Treasury yields have risen from 7.2 % in 2023 to 8.5 % in 2025, prompting PMS investors to re‑balance towards shorter durations and corporate bonds with higher spreads.

Risks & Mitigation

No investment is risk‑free, and Business Today’s analysis underscores that customised debt portfolios come with specific pitfalls:

• Credit Concentration: A heavily weighted corporate bond portfolio can suffer from a single issuer’s default. PMS managers mitigate this through stress testing and credit spreads.
• Liquidity Risk: In stressed markets, redemption requests may exceed the portfolio’s immediate liquid holdings. Investors should factor in liquidity buffers and possibly staggered redemption schedules.
• Operational Risk: With more hands‑on management, the potential for human error or mis‑execution increases. Robust internal controls and third‑party audits are essential.

The article concludes that while the risk profile can be more nuanced in PMS, the customisable nature allows investors to align risk more closely with their own tolerance levels, often resulting in a net risk reduction compared to a one‑size‑fits‑all mutual fund.

What This Means for HNIs

The surge in debt PMS investment suggests that HNIs are seeking greater control and tailored solutions over their fixed‑income allocations. While the upfront fees are higher, many investors justify the premium by citing:

• Enhanced returns relative to the benchmark after fees,
• Greater flexibility to adjust to macro‑economic signals, and
• Better alignment with tax‑planning objectives.

Business Today's key takeaway is that not all customisation pays the same price. For investors with high‑volume allocations (over ₹5 trillion), the marginal difference in fees becomes less pronounced as economies of scale come into play. In contrast, mid‑tier HNIs may need to weigh whether the marginal out‑performance truly compensates for the higher cost.

Bottom Line

Debt PMS has moved from a niche product to a mainstream fixture for HNIs. The data from Business Today’s study paint a compelling picture: the fee‑adjusted performance differential, the strategic flexibility, and the regulatory transparency now in place create a robust framework for customised debt investing. However, as with any investment, the choice between a private, tailor‑made solution and a diversified, low‑fee mutual fund hinges on an investor’s individual goals, risk tolerance, and liquidity needs.

For those considering a shift, the article recommends a detailed cost‑benefit analysis with a qualified wealth manager, a thorough review of the portfolio’s risk–return characteristics, and an assessment of how the investment fits within the broader tax and estate‑planning strategy. With the right due diligence, debt PMS can offer a compelling blend of customisation and performance that may well justify the premium, especially in an increasingly complex economic landscape.