SEBI Proposes Easier Rules and Lower Investment Minimums for Mutual Fund PMS

The Securities and Exchange Board of India (SEBI) has proposed a separate regulatory framework for portfolio management services (PMS) that invest only in mutual fund schemes, as per The Economic Times news report.  

In its consultation paper, the regulator has suggested reducing the minimum investment amount for such portfolios to ₹25 lakh from the current ₹50 lakh.  

The proposals are specific to mutual fund-based PMS and do not apply to traditional PMS offerings that invest directly in listed shares. 

Investment Structure Differs from Equity PMS 

A mutual fund PMS does not invest in individual stocks. Instead, the portfolio is built using mutual fund schemes, exchange-traded funds (ETFs), and Specialised Investment Funds (SIFs). Depending on the investment mandate, it may also include debt funds, international equity funds, gold and silver ETFs, REITs, and InvITs. 

The portfolio manager is responsible for deciding the allocation across these asset classes. Holdings may be changed periodically based on market conditions, valuations, and the objectives agreed with the investor. 

Regulatory Relaxations Proposed 

Along with reducing the investment threshold, SEBI has proposed lowering the minimum net-worth requirement for mutual fund PMS providers from ₹5 crore to ₹2 crore.  

The consultation paper also recommends simpler certification requirements for portfolio managers. 

In addition, dedicated dealing rooms would become optional for providers operating only in mutual fund products. SEBI has also proposed removing exit loads when portfolio managers switch between mutual fund schemes within the same PMS portfolio. 

How it Differs from Investing Directly? 

Investors managing their own mutual fund portfolios decide asset allocation, select schemes, monitor performance and rebalance investments whenever required.  

Under a mutual fund PMS, these decisions are taken by the portfolio manager within the investment mandate accepted by the client. The manager is responsible for selecting schemes, adjusting allocations, managing cash positions, and carrying out periodic portfolio rebalancing.   

Investors pay a fee for these services, while direct mutual fund investors continue to manage their portfolios independently or through advisers. 

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Conclusion 

If implemented, the proposals would introduce a distinct regulatory structure for mutual fund-only PMS while reducing the minimum investment amount to ₹25 lakh. The consultation process is currently underway. 

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
Mutual Fund Investments are subject to market risks, read all the related documents carefully before investing.