Sweeping proposals
The key proposal for investors is a dedicated mutual fund-only PMS framework, managing only direct plans of mutual fund schemes including exchange-traded funds (ETFs) and specialised investment funds (SIFs). The minimum ticket size drops from Rs.50 lakh to Rs.25 lakh and the net worth requirement from Rs.5 crore to Rs.2 crore, with simplified certification, optional dealing room and waiver of exit load provisions.
Portfolio managers operating under this framework may be allowed to charge a fixed management fee, capped at 2.5% of the client’s assets under management (AUM). Other than fixed management fees, managers would be able to charge performancebased fee or a combination of both fixed management fees and performance-based fee, with the explicit consent of the client.
Biharilal Deora, Chairman, Association of Portfolio Managers in India, said the category “has the potential to widen access to investors to have professionally managed, customised investment solutions while preserving the distinction between traditional mutual funds and bespoke portfolio management.” With robust suitability norms it could also give registered investment advisors and large mutual fund distributors room to evolve, he added.
Mayur Shah, PMS fund manager at Anand Rathi Advisors, questioned the separate registration requirement. “Existing portfolio managers could be given the option to maintain a dedicated client setup for this category, with separate demat accounts for each client and independent fund accounting, rather than being required to obtain a separate registration.”
Wider universe
The Sebi paper also proposes permitting investments in “to-be-listed” securities, allowing discretionary PMS to invest up to 10% of a client’s assets in investmentgrade unlisted debt securities, and opening up foreign securities, listed equity, listed debt and overseas funds investing in listed securities or overseas-listed REITs, under both discretionary and non-discretionary mandates. Foreign investments will be governed by FEMA, 1999, and will require explicit positive client consent.
Deora said, “Expanding the permissible investment universe to include foreign securities, exchange-traded derivatives, unlisted securities and securities proposed to be listed will provide portfolio managers greater flexibility to construct diversified portfolios and deliver differentiated investment strategies, subject to appropriate risk management and disclosure standards.”
Shah called it a move to bring PMS closer to alternative investment funds, SIFs and mutual funds. But he flagged gaps: “Greater clarity is required on whether such investments can be held at the pool level. Further, under the ‘to-be-listed’ category, it would be helpful to clarify whether lock-in norms would apply and how the redemption framework would operate.”
Derivatives flexibility
Portfolio managers may be allowed total exposure of up to 1.25 times client assets through exchange-traded derivatives, with unhedged short exposure capped at 50% of AUM through equity derivatives, and option premium exposure limited to 10%. Client consent will be mandatory.
Compliance easing
Other proposals include digital sharing of disclosure documents, filing timelines revised from 7 working days to 10 calendar days, corporate governance report timelines widened to 60 days, demat account portability across portfolio managers, and relief from getting fresh power of attorney. Dealing room requirements may be waived for managers with less than 10 clients or AUM below Rs.100 crore. Existing clients with the grandfathered Rs.25 lakh minimum will have 36 months to comply with the Rs.50 lakh threshold, except MF-PMS clients.
Why now?
The PMS industry has more than doubled since the last review. Sebi said the review was prompted by rising investor sophistication and demand for more personalised solutions. Public comments are open until 13 August 2026.
