SEBI proposes mutual fund-only PMS framework to expand investment options, ease compliance
New Delhi, July 24
The Securities and Exchange Board of India has proposed a revision of portfolio management regulations to create a mutual fund-only portfolio management service category, as per a statement by the markets regulator.
SEBI issued a consultation paper on Thursday, proposing a comprehensive review of the Portfolio Managers Regulations, 2020 to expand the investment opportunities, ease compliance requirements and simplify the regulatory framework for the portfolio management industry.
"The objective of this consultation paper is to seek comments and views from the public on the proposed amendments to the SEBI (Portfolio Managers) Regulations, 2020 ("PM Regulations") and circulars issued thereunder, carried out pursuant to a comprehensive Review," it said.
The markets regulator noted that the Assets Under Management (AUM) of the Portfolio Management Services (PMS) industry had risen to Rs 42.61 lakh crore as of May 31, 2026, from Rs 18.07 lakh crore in April 2019. The number of PMS clients also increased to 2.19 lakh from 1.5 lakh during the same period.
Meanwhile, the number of portfolio managers more than doubled to 515 as of May 31, 2026, from 226 in 2020, when the PMS Regulations were revamped.
Noting the significant growth and increasing adoption of technology in the Portfolio Management Services industry, SEBI said it undertook a comprehensive review of the PMS Regulations to align them with evolving industry dynamics, rising investor sophistication, growing demand for personalised solutions and diversified portfolios.
SEBI has recommended introduction of a dedicated mutual fund-only PMS framework which will enable portfolio managers to manage client funds exclusively through direct plans of mutual fund schemes, including exchange-traded funds and specialised investment funds, under a separate MF-PMS registration.
"Under the PM Regulations, portfolio managers are permitted to invest client's funds in units of Mutual Funds along with other permissible securities. Based on representation and requests received from industry stakeholders, there is a recognized demand for a simplified "Mutual Fund-only" PMS framework with lowered entry barriers," it said.
The markets regulator has proposed easing entry requirements for the portfolio management industry by reducing the minimum client investment threshold from Rs 50 lakh to Rs 25 lakh and the minimum net worth requirement for applicants from Rs 5 crore to Rs 2 crore. Existing portfolio managers would also be allowed to offer MF-PMS through a separate investment approach as per the release.
The regulator has proposed capping fixed management fees under the revised framework. "Portfolio managers operating under this framework shall be permitted to charge a fixed management fee, capped at a maximum of 2.5% of the client's AUM," SEBI noted.
— ANI
Reader Comments
The mutual fund-only PMS framework sounds promising but I'm skeptical. Portfolio managers have always been more flexible with direct stock picking. If they can only invest in MF units, what's the point? Might as well just buy direct plans ourselves. Still, the reduced net worth requirement from ₹5 crore to ₹2 crore will encourage more competition. Let's see.
As a small investor, this is exciting news! ₹25 lakh entry barrier means many more people can access professional portfolio management. But I hope SEBI ensures proper transparency in fees. The 2.5% cap on management fees is good, but hidden charges often eat into returns. Need strict monitoring! 💪
This is a classic case of regulators catching up with market demand. PMS AUM growing from ₹18 lakh crore to ₹42 lakh crore in 5 years shows huge appetite. But I'm worried about quality control - reducing net worth requirements might lead to more fly-by-night operators. SEBI should also mandate regular disclosures for these MF-only PMS providers.
Great initiative from SEBI! This will democratize investment management in India. Many NRIs like me were looking for simplified PMS options. The mutual fund-only approach reduces risk and complexity. However, I wish they had also considered including some international ETFs in the framework - diversification across borders would be a bonus. 🇮🇳
Good step but why cap at 2.5%? Some portfolio managers provide exceptional value and should be able to charge higher fees based on performance. Instead of a blanket cap, SEBI could
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