NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers

SEBI Performance Reporting and Disclosure Norms for PMS

Updated 11 October 2026 · Fact-checked

SEBI requires portfolio managers to report PMS returns using the Time-Weighted Rate of Return (TWRR) method, so that client deposits and withdrawals do not distort results. Performance data is submitted to a common repository run by APMI, and it is disclosed to investors on a standard basis so strategies can be compared fairly.

Understand SEBI Performance Reporting and Disclosure Norms for PMS

Before SEBI standardised reporting, each portfolio manager could calculate returns in its own way. One manager might show returns on the money invested at the start. Another might ignore the effect of money added later. Two managers with the same skill could show very different numbers. Investors and distributors could not compare them.

SEBI fixed this by prescribing a common method: the Time-Weighted Rate of Return (TWRR). TWRR measures how well the manager's investment decisions performed. It removes the effect of when the client put money in or took money out. The manager does not control those flows, so they should not change the manager's score.

The second part is a central data store. SEBI asked APMI (Association of Portfolio Managers in India) to act as the repository of PMS performance data. Portfolio managers submit their strategy-wise performance data to it in a common format. The data is checked, and the aggregated figures are made available to the public. This is how investors and distributors can verify and compare performance. They do not have to rely only on a manager's own brochure.

The third part is disclosure. The Disclosure Document and other communication must present performance in the prescribed way. Returns are shown on the TWRR basis, for standard periods, and against a benchmark. Past performance is never presented as a guarantee of future results.

As a PMS distributor, you must know this framework. You use performance numbers to explain strategies to clients. If you quote returns that do not follow the norms, you mislead the client and break the code of conduct. For the exam, remember three ideas: one method (TWRR), one repository (APMI), and fair, comparable disclosure. Always check the exact lists and periods against your NISM workbook.

Key formulas to remember

Sub-period return: r = (Value at end of sub-period, before any new flow) ÷ (Value at start of sub-period) − 1; A new sub-period begins every time there is a deposit or withdrawal. The start value includes any flow made at that point.
TWRR (cumulative): TWRR = [(1 + r₁) × (1 + r₂) × … × (1 + rₙ)] − 1; Sub-period returns are linked by multiplication, not added. Cash flows do not change the result.
Annualising a multi-year return: Annualised return = (1 + cumulative return)^(1 ÷ years) − 1; Used for periods longer than one year. For periods under a year, the return is generally shown as an absolute (non-annualised) figure. Confirm the exact convention in the workbook.
Core reporting rules: Method = TWRR; Data repository = APMI; Comparison = against benchmark; Returns must follow the prescribed method and period. Past performance does not guarantee future returns.

How to solve SEBI Performance Reporting and Disclosure Norms for PMS questions

Questions on this topic are either rule-recall (which method, which body, what must be disclosed) or a short TWRR calculation. Use this method for both.

1Read the question and decide if it asks for a rule (who, what, which method) or a number (a return).
2For a rule question, link it to the three anchors: TWRR as the method, APMI as the repository, and standard disclosure for fair comparison.
3Eliminate options that use other methods, such as simple return on closing capital, money-weighted return or an average of monthly returns, when the question is about the SEBI-prescribed approach.
4For a calculation, list every date on which money was added or withdrawn. These dates split the period into sub-periods.
5Compute each sub-period return as end value (before the new flow) ÷ start value − 1.
6Link the sub-period returns: multiply the (1 + r) factors and subtract 1.
7If the period is longer than one year and the question asks for an annual figure, take the root: (1 + R)^(1 ÷ years) − 1.
8Check the answer for sense: a positive return in every sub-period should give a positive TWRR, and the TWRR should not depend on the size of the flows.

Quickest way: Three-anchor recall and link-the-factors shortcut

When to use it: Use it when you have about a minute per question and the options look similar.

Rule question: pick the option with TWRR, APMI or standard comparable disclosure. Reject options that let each manager choose its own method.
Calculation question: convert each sub-period return into a growth factor, such as 10% to 1.10.
Multiply the factors and subtract 1. Ignore the size of the deposits and withdrawals except to calculate the new start value.
For annualising, test the options. A 21% two-year return is 10% a year because 1.10 × 1.10 = 1.21.

Common mistakes in SEBI Performance Reporting and Disclosure Norms for PMS

Adding sub-period returns instead of multiplying them.
Adding feels natural, and it is easier than compounding.
Fix: Always link with (1 + r) factors. 10% and 20% give 1.10 × 1.20 − 1 = 32%, not 30%.
Using the closing value minus total money invested as the return when cash flows occurred.
It is the simple gain figure most people know from everyday investing.
Fix: Remember that TWRR removes the effect of client flows. Split the period at each flow and link the sub-period returns.
Confusing TWRR with a return that depends on timing of client deposits (money-weighted return).
Both use cash flows, and the names sound alike.
Fix: TWRR measures the manager's skill and is unaffected by flow timing. A money-weighted return reflects the investor's own timing.
Thinking each portfolio manager may choose its own calculation method and publish its own performance record.
Before standardisation this was common, and old marketing material may still look that way.
Fix: SEBI prescribes TWRR, and performance data goes to the APMI repository in a common format for comparison.
Saying APMI is a regulator that licenses portfolio managers.
APMI is an industry body, and the word association is overlooked.
Fix: SEBI is the regulator and registers portfolio managers. APMI is the industry association that holds the performance data repository.
Treating past performance as an assurance in client communication.
Strong returns are tempting to use as a selling point.
Fix: State clearly that past performance is not an indicator of future returns. Never promise or guarantee returns.

Worked examples

Example 1

A client starts a PMS account with ₹1,00,000. At the end of month 1 the portfolio is worth ₹1,10,000. The client then adds ₹40,000. At the end of month 2 the portfolio is worth ₹1,80,000. Find the TWRR for the two months.

Show the solution

Sub-period 1: start ₹1,00,000, end ₹1,10,000 before the new flow. r₁ = 1,10,000 ÷ 1,00,000 − 1 = 10%.
The client adds ₹40,000, so the new start value is ₹1,10,000 + ₹40,000 = ₹1,50,000.
Sub-period 2: start ₹1,50,000, end ₹1,80,000. r₂ = 1,80,000 ÷ 1,50,000 − 1 = 20%.
Link the returns: TWRR = (1.10 × 1.20) − 1 = 1.32 − 1 = 32%.

Answer: TWRR = 32% for the two months. The simple gain on total money invested would be ₹40,000 on ₹1,40,000, about 28.6%. That figure is distorted by the added money, which is why TWRR is used.

Example 2

A portfolio manager's strategy has a cumulative TWRR of 21% over exactly two years. What is the annualised return?

Show the solution

The period is longer than one year, so annualise: (1 + R)^(1 ÷ years) − 1.
Here R = 21% = 0.21 and years = 2, so the factor is 1.21^(1 ÷ 2).
The square root of 1.21 is 1.10.
Annualised return = 1.10 − 1 = 10%.

Answer: 10% a year. Note that dividing 21% by 2 gives 10.5%, which is wrong because it ignores compounding.

Exam tips

Expect direct recall: which method SEBI prescribes for PMS returns (TWRR), and which body holds the performance data repository (APMI).
In option sets, the wrong choices are usually other return methods or an average of returns. Remember TWRR removes client cash-flow effects.
For calculations, always multiply growth factors. Adding returns is a typical trap option.
Read the period carefully: use annualisation only when the question asks for an annual figure over more than one year.
NISM XXI-A has negative marking of 10% of the marks for a wrong answer, so attempt questions where you can eliminate at least two options.

Practice questions from Performance Measurement and Evaluation of Portfolio Managers

SEBI Performance Reporting and Disclosure Norms for PMS: frequently asked questions

Which method does SEBI require for calculating PMS returns?

SEBI requires portfolio managers to use the Time-Weighted Rate of Return (TWRR) method. It removes the effect of client deposits and withdrawals so that returns reflect the manager's investment decisions. This makes returns comparable across managers.

What is the role of APMI in PMS performance reporting?

APMI, the Association of Portfolio Managers in India, acts as the repository of PMS performance data. Portfolio managers submit their strategy-wise data in a common format, and the data is checked and published. Investors and distributors can use it to compare and verify performance.

How can I verify the PMS performance a manager claims?

Compare the manager's figures with the performance data available through the APMI repository. Also check that the Disclosure Document presents returns on the TWRR basis against a benchmark. If the numbers use a different method or period, ask the manager to explain.

Is TWRR the same as the return the client actually earns?

No. TWRR measures the manager's performance and ignores the timing and size of client flows. A client who added money just before a fall may earn less than the TWRR, and one who added before a rise may earn more.