Sebi moots MF-only PMS framework, lowers minimum investment to ₹25 lakh

Investment in overseas securities and expanding the use of exchange-traded derivatives also part of proposal

The Securities and Exchange Board of India (Sebi) has proposed introducing a new mutual fund-only portfolio management services (MF-PMS) framework with lower entry barriers, alongside a broader overhaul of regulations governing portfolio managers. 

 

The proposals, released through a consultation paper on Thursday, also include allowing portfolio managers to invest in overseas securities, expanding the use of exchange-traded derivatives and permitting investments in to-be-listed and unlisted securities.

 

The proposed MF-PMS framework would lower the minimum investment threshold to ₹25 lakh from the current ₹50 lakh for regular PMS, while easing the minimum net worth requirement for MF-PMS applicants to ₹2 crore from ₹5 crore. It would also allow portfolio managers to exclusively manage investments in direct plans of MF schemes and specialised investment funds (SIFs).

 

“This proposed framework aims to effectively serve mass-affluent investors who seek professional PMS for their MF investments,” Sebi noted.

 

The Association of Portfolio Managers in India (APMI) said the framework will help PMS expand their investor base.

 

“It has the potential to widen access to millions of investors to have professionally managed and customised investment solutions. If implemented with robust suitability norms and investor safeguards, this could expand the addressable investor base, strengthen the overall PMS ecosystem, and provide flexible solutions for registered investment advisors and large MF distributors to also evolve in their journey,” said Biharilal Deora, chairman, APMI.

 

The framework would also relax qualification and experience requirements for principal officers, while exempting such players from maintaining a dedicated dealing room. They will be able to charge fixed management fees of up to 2.5 per cent of assets under management (AUM). There is also a provision of performance-based fees.

 

The consultation paper also proposes allowing portfolio managers to invest client funds in overseas equities, debt instruments and mutual funds, subject to Foreign Exchange Management Act and Liberalised Remittance Scheme limits.

 

In another proposal, Sebi has suggested permitting investments in ‘to-be-listed’ domestic securities to broaden the investment universe. It has also proposed allowing discretionary portfolio managers to invest up to 10 per cent of a client’s AUM in investment-grade unlisted debt securities.

 

Further, Sebi plans to give portfolio managers greater flexibility to use exchange-traded derivatives by allowing total exposure of up to 1.25 times a client’s AUM, while capping unhedged short positions at 50 per cent of AUM and the total options premium paid and received at 10 per cent of AUM.

 

“Expanding the permissible investment universe to include foreign securities, exchange-traded derivatives, unlisted securities and securities proposed to be listed will provide portfolio managers with greater flexibility to construct diversified portfolios and deliver differentiated investment strategies,” said  Deora.

 

Sebi said the comprehensive review of the Portfolio Managers Regulations was undertaken in view of the rapid growth of the industry and changing investor needs. The regulator noted that the PMS industry’s assets under management have increased to ₹42.61 trillion as of May 31, 2026, from ₹18.07 trillion in April 2019, while the number of registered portfolio managers has more than doubled to 515 since the regulations were revamped in 2020. 

Key proposals

• Investment limited to direct mutual fund schemes and SIFs
• Portfolio managers may be allowed to invest client money in overseas securities
• Up to 10 per cent of client AUM can be invested in investment-grade unlisted debt
• Exchange-traded derivatives exposure may be allowed up to 1.25x client AUM
• As of May 2026, PMS industry AUM has grown 2.36x to ₹42.61 lakh trillion in 7 years