What Happens to Your PMS If the Fund Manager Shuts Down?

Ans: PMS is regulated by SEBI, and the core protection is structural: your securities and cash sit in your own demat and bank account, not in a pooled fund, and a SEBI-registered custodian — kept separate from the portfolio manager — holds your securities in custody. That doesn't eliminate market risk or the risk of manager underperformance, but it does mean a portfolio manager's business failure doesn't automatically put your holdings at risk the way, say, an unsecured company bankruptcy would.

Ans: Losing your money specifically because your provider shuts down is unlikely, since your securities are already registered in your own name and held by an independent custodian, not the portfolio manager itself. You can still lose money from ordinary market movements or investment decisions made before the shutdown — that risk never goes away — but the shutdown event itself isn't what puts your capital at risk.

Ans: Your securities are held in your own individual demat account, and SEBI (Portfolio Managers) Regulations, 2020 require every portfolio manager offering discretionary services to appoint an independent, SEBI-registered custodian to hold and safeguard them. The portfolio manager itself never takes custody or ownership of your assets — it only has trading authority under a Power of Attorney.

Ans: A Power of Attorney only authorizes your portfolio manager to place trades on your behalf — it never transfers ownership of your assets. If the manager exits the business, that authority effectively ends with the relationship, and you (or a new manager you choose to appoint, under a fresh POA) regain full control over trading decisions on the securities already sitting in your demat account.

Ans: This is a genuine open question: neither SEBI's regulations nor its October 2025 circular on PMS business transfers spell out the tax treatment of an involuntary manager-to-manager transfer. If this happens to you, it's worth confirming directly with a tax advisor and your new portfolio manager rather than assuming either way.

Ans: Every SEBI-registered portfolio manager has a registration number you can verify directly on SEBI's website before investing, rather than relying on a claim made in a pitch deck. As of early 2026, SEBI's data shows 506 registered portfolio managers — the highest count in over a decade — so checking the specific registration number of the firm you're considering is a quick, meaningful step.

Ans: The minimum investment for Portfolio Management Services in India is ₹50 lakh, as mandated by SEBI. That's significantly higher than mutual funds, which is one reason PMS is positioned for HNI (high-net-worth individual) investors rather than mass-retail investors.

Ans: Unlike PMS, an AIF is a pooled trust, so winding one up follows a formal process under Regulation 29 of the SEBI (Alternative Investment Funds) Regulations, 2012 — typically triggered by the fund's tenure expiring, a SEBI direction, or a resolution passed by 75% of investors by value. Once triggered, the fund enters a liquidation period of up to 12 months to sell down positions and distribute proceeds, and for trust-structured AIFs, the trustee can also initiate this process directly if it believes doing so serves investors' interests.

Ans: The difference comes down to structure. In a PMS, you individually own the underlying securities in your own demat account, so if the manager exits, there's nothing to unwind — your holdings are already yours. In an AIF, your money is pooled with other investors' into a trust, so winding it up means liquidating the fund's collective portfolio and distributing proceeds proportionally — a process that takes months and depends heavily on how liquid the fund's underlying investments are.