Sebi proposal to allow AMCs to manage family office funds sparks debate

Sebi's plan to let AMCs manage non-broad-based pooled funds without PMS licences has sparked debate over regulatory parity, competitive fairness, and market safeguards

The Securities and Exchange Board of India’s (Sebi) recent proposal to allow asset management companies (AMCs) to manage family office funds has stirred a debate, with concerns surfacing around regulatory overlap and market parity.

 

Currently, AMCs are allowed to manage only the broad-based funds.

 

On July 7, Sebi had released a consultation paper suggesting major relaxations to existing regulations. The key proposal included allowing AMCs to manage non-broad-based pooled funds, such as family offices and certain offshore vehicles, without needing a separate portfolio management services (PMS) license, provided strict checks and balances are implemented.

 

“If AMCs are allowed to offer segregated mandates to large clients under a new category, the lines between PMS and mutual funds (MFs) will blur further. This raises regulatory parity questions,” said Sonam Srivastava, founder and fund manager at Wright Research PMS, arguing that PMS managers operate under stricter minimum investment thresholds, compliance costs, and client suitability obligations. 

 

 

“If AMCs are allowed to offer similar services under the MF umbrella but with lighter-touch regulation or brand-driven advantages, it could lead to competitive imbalance and arbitrage,” she added.

 

 

Until now, AMCs interested in offering management and advisory services to these types of funds were required to hold a PMS license, a layer of regulation that the AMC sector argued caused an uneven playing field compared to other intermediaries.

 

Sebi’s latest proposals opens up a new revenue stream for the domestic MF industry which handles ₹75-trillion in assets.

 

“The proposals could enable AMCs to engage with a wider spectrum of pooled vehicles which are non-broad based such as family offices or select offshore funds, which were earlier outside the regulatory scope,” said Swarup Mohanty, vice chairman & CEO, Mirae Asset Investment Managers (India).

 

Mohanty added that facilitating access to global markets and allowing AMCs to distribute their own funds overseas introduces interesting long-term potential.

 

Under the new proposal, non-broad-based funds are defined as funds with fewer than 20 investors, or where a single investor holds more than 25 per cent of the corpus.

 

 

Sebi has outlined safeguards to address potential conflicts of interest, including caps on fee differentials, resource allocation rules, and clear firewalls between mutual fund and private mandates.

 

Pradeep Gupta, executive director-head of investments at Lighthouse Canton India, said a new set of investors will benefit from the buy-side investment architecture that is deeply experienced, well-resourced, and has proven itself through multiple market cycles.

 

A recent Jefferies report indicated that the high-net-worth investor (HNI) segment is already crowded, with revenue streams layered through various commissions and fees. Professional wealth managers now oversee assets upwards of ₹65 trillion, and the space is witnessing strong competitive momentum for deepening service offerings. The report noted a likely trend towards advisory-led models as wealth managers look to tap larger ticket clients. 

 

Despite apprehensions over increased competition, several PMS managers believe their established expertise in addressing ultra-HNI requirements will remain a differentiator.

 

Divam Sharma, co-founder & fund manager, Green Portfolio PMS, said AMCs entering this space will increase overall competition, but they’ll face stricter controls on fees and operations. “We’ve already built the systems and expertise needed for personalised, complex wealth solutions, so most family offices will continue to seek out hands-on, bespoke service,” he added.