Why can a PMS outperform strongly for a few years and then suddenly underperform?

Published 19 September 2026

Anoop Dixit from Pune

I often see PMS products marketed using strong 3-year or 5-year returns. How do I know whether that outperformance came from manager skill or simply from the investment style being in favour?

Sachin Kabra Co-founder Foliyo (SEBI RIA No: INA000023454), ex-Director HDFC Private Wealth, Business Head Motilal Oswal AMC LinkedIn

Returns do not come from nowhere.

They come from a particular strategy, investment style, sector exposure, market-cap exposure or portfolio concentration.

A quality strategy, value strategy, momentum strategy, mid-cap portfolio or thematic portfolio can all behave very differently in the same market.

For example, the video discusses how the Nifty 200 Momentum 30 Index and the Nifty 200 Value 30 Index produced completely different outcomes over the same period, despite both coming from the same Nifty 200 universe.

Strong recent performance should make you ask what created the return, not simply assume the manager will repeat it.

“When next time someone shows you that strong recent outperformance, don’t just stop at the return but ask what got this recent outperformance.”

“Sometimes what appears to be the sheer brilliance of a manager can actually be plain luck.”

This is not personalized investment advice. Your portfolio size, goals, liabilities and risk tolerance may be different, so assess your own situation and discuss it with your financial advisor.

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