Discretionary PMS: the manager executes
In a discretionary PMS - the dominant model in India by a wide margin - the fund manager makes and executes all investment decisions within the agreed strategy. No trade-by-trade approvals. No phone calls before every transaction.
The legal mechanics: you sign a Power of Attorney (POA) authorising the portfolio manager to transact in your demat account on your behalf. The POA is limited to the management of the portfolio under the agreement - it is the operational backbone that lets a professional actually run the strategy.
Your control is exercised at two points. At entry: you choose the strategy - its mandate, style and benchmark are contractually defined. And you declare a negative list = companies or sectors that may never enter your portfolio. Tobacco. Alcohol. A competitor of your own business. The exclusion is honoured permanently. Throughout: complete transparency. Every holding and transaction visible in your demat, in real time.
What you give up is trade-level involvement. What you get is the full value of professional discipline - including the speed to act on opportunities without waiting for client approvals.
Non-discretionary PMS: the manager recommends, you decide
In the non-discretionary model, the manager provides research and recommendations - but every transaction requires your explicit consent before execution.
You retain decision authority on each trade. The manager's role is advisory-executional: they bring the ideas, you make the calls.
The practical friction is obvious: opportunities in markets are time-sensitive, and a model requiring client sign-off on each trade moves at the client's pace, not the market's. This model suits a narrow band of investors - typically those who want institutional research but insist on final authority, and have the time to exercise it responsibly.
Why discretionary dominates
The overwhelming majority of Indian PMS assets sit in discretionary structures - and the logic is straightforward. Investors engage a PMS precisely because a professional's full-time attention outperforms their own part-time attention. Retaining trade-level veto power reintroduces the very bottleneck the structure exists to remove.
The honest caveat
Discretionary management demands genuine trust - and trust should be earned by evidence, not marketing. Before signing a POA, the evidence worth examining: consistent multi-period Alpha, fund manager tenure, strategy clarity, and a fee structure you fully understand. Comfort with the model matters too. An investor who will lose sleep over trades they didn't approve is better served accepting that about themselves before entry, not after.
The takeaway
Discretionary PMS is a considered transfer of execution - bounded by strategy mandate, your negative list, and total transparency. Understand those boundaries, verify the evidence, and the model works exactly as designed.
Evidence first: consistency-filtered strategies →