Portfolio management services (PMS) providers create concentrated and customized options with equity and debt. Unlike the diversified mutual funds aimed at retail investors, PMS firms have a higher entry ticket size of ₹50 lakh, catering to high-net-worth individuals who are comfortable with higher risk.

The PMS industry’s share of clients from non-metros has surged over the past three years, according to a Mint analysis of investors of some of the top firms in India. For instance, ICICI Prudential Asset Management Co, one of the largest portfolio managers in the country with PMS assets worth ₹27,000 crore, has seen the share of such investors from non-metros nearly triple in three years from 10-12% to 30%.

“Earlier, the majority of the money from non-metro cities used to come from Surat and Rajkot from Gujarat, where investment into equities is high,” said Praveen Ladia, chief executive officer at Karma Capital. “Now with the scope and awareness of alternatives increasing, we are seeing flows coming from Jodhpur, Raipur, Aurangabad, Indore and as far as Guwahati and Tirupur also.”

Overall, the PMS industry’s client count has nearly doubled, from about 130,000 to 220,000 in three years through October, according to data from the Securities and Exchange Board of India (Sebi). The industry’s assets under management (AUM)–excluding employee provident fund (EPFO) money as it is not reflected in industry AUM—surged 1.7 times to ₹8.54 trillion during the period. Clients from smaller cities have contributed to this growth.

Deserv Investments Pvt. Ltd, which manages ₹10,000 crore in PMS assets, now has investors from non-metro cities accounting for 40% of its base, up from 30% two years ago. The contribution of these investors to its AUM has grown from 17% to 22% during the period.

Karma Capital, which manages ₹7,298 crore in PMS assets, has 20% of its clients from outside metros, compared with a low single-digit percentage three years ago. For Marcellus Investment Managers, with ₹3,542 crore in PMS assets, the share has increased to 22% from 16%.

Most of the new people coming in from non-metros are business owners, in contrast to the salaried HNIs in the metro cities, according to Ladia. “A lot of mutual fund distributors who have seen significant growth in recent years and professionals-turned-advisors are also investing in alternatives.”

Behind the rise

The rise in participation from smaller cities is largely driven by the post-Covid financialization wave, which has structurally expanded mutual fund penetration nationwide, said Sharzad Sethna, head of sales, alternate investments, at ICICI Prudential AMC.

Mutual funds’ investor base from B30 cities–geographical regions after the top 30 cities–grew at an annualized rate of 36% from March 2023 to January 2025 to 2.08 crore, according to a report by CAMS, a MF transfer agent. By comparison, the investor base in the top 30 cities (T30 locations) grew at a CAGR of 22% to 1.48 crore during the period.

With rising incomes, greater awareness, and higher risk-taking ability, investors are naturally progressing from traditional products such as fixed deposits, gold and real estate to mutual funds, then to direct stocks, and eventually to PMS and alternative investment funds (AIFs), Sethna said.

While HNIs in small-town India are increasingly opting for equity-heavy products from portfolio managers, their counterparts in metros prefer AIFs, including private credit, angel funds, and others, according to experts.

Managing new and old wealth

The formalization of the economy has compelled small and medium business owners from the non-metro cities to bring their proceeds into the formal financial system, creating a new pool of investable surplus, said Sandeep Jethwani, co-founder, Dezerv.

Bhaskar Bukrediwala, head of PMS at IIFL Capital, recently conducted 200 meetings and hosted events in tier 2 cities and beyond. “Individuals here are inheriting wealth from their earlier generations. Some cities are growing faster, and they have also seen a jump in property prices, which has led to wealth creation,” said Bukrediwala. “A part of this wealth is getting allocated to PMSes.”

Suguna Vinodh, a food blogger from Coimbatore, is one such investor. She has been investing in direct stocks, bonds, and mutual funds for over a decade. Around four years ago, she added NAFA, a Chennai-based PMS, to her portfolio.

“I wanted some diversification in my portfolio, and Balaji Vaidyanath, the fund manager at NAFA Asset Managers, is a good friend. His fund was performing well, so I invested,” said Suguna.

“In PMS, the updates are real-time—every day, I can see what the fund manager bought or sold. In a mutual fund, the factsheet comes only monthly,” she said. “Plus, there is a personal touch in a PMS. I can call the relationship manager any day and ask about the rationale behind an investment. The downside is that every churn is taxable, although it evens out over the long term.”

Some investors are simply looking to protect and grow inherited family wealth, according to Megha Jose, CEO of Fortune Wealth Management, a PMS that her father started.

“My experience may be different since I grew up around markets, but many of my friends and clients who have tried investing on their own, lost money or found it too complicated to self-manage,” Jose said.

“My experience may be different since I grew up around markets, but many of my friends and clients who have tried investing on their own, lost money,” Jose said.

Many heirs are not so keen on running traditional family businesses, especially in places like Coimbatore, where long-established textile and auto-component units have either shut down or are winding down, she said. These families have built substantial wealth over decades, and the younger generation now prefers to channel that money into capital markets through family offices, Jose said.

Deeper distribution

The growing number of PMS distributors in non-metros has contributed to this change. Their count rose from 11,299 in April to 17,027 as of October, according to the Association of Portfolio Managers of India (APMI). APMI began disclosing data on distributors in April this year.

“The distribution network has expanded far beyond metros, and many distributors now cater to HNIs in tier-2 and tier-3 cities as well,” said Pramod Gubbi, co-founder at Marcellus Investment Managers. In non-metro cities, investments are still largely distributor-led, Gubbi said.

Pallava Rajan, founder at PMS Bazaar, said that in recent years, investors have been inquiring about PMSes in tier 1 cities and beyond. “They see a particular fund doing well and ask distributors why they are not selling that fund.”