Mint Explainer| Will Sebi's proposed changes lift the portfolio management industry?

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The Securities and Exchange Board of India (Sebi) has proposed a revamp of portfolio management regulations with the aim to broaden investment avenues, ease compliance and simplify the regulatory framework for portfolio management services (PMS) firms, in a consultation paper issued on Thursday.

PMS allows professional fund managers to run customised portfolios for affluent investors with a minimum investment of ₹500,000. Mint unpacks the changes and what it means for the industry

One of the biggest proposals is the introduction of a mutual fund-only PMS (MF-PMS) framework, which will allow portfolio managers to exclusively manage investments in direct plans of mutual fund schemes, including exchange traded funds and specialised investment funds (SIF). Under MF-PMS, the minimum investment requirement is proposed to be reduced to ₹250,000.

The regulator has also proposed allowing portfolio managers to invest in “to-be-listed” securities and up to 10% of a client’s assets under management (AUM) in investment-grade unlisted debt securities under discretionary PMS.

Discretionary PMS is an investment model where a professional manager is given full authority to make all buying, selling, and asset allocation decisions on an investor’s behalf.

Another key change is allowing PMS managers to invest client money in overseas securities, including listed equity, listed debt securities and overseas mutual funds, bringing them closer to the investment flexibility available to mutual funds and alternative investment funds.

Sebi said the review was necessary to ensure that PMS regulations keep pace with industry growth. The PMS AUM have risen two-fold to ₹42.61 trillion as of May 2026, when compared to April 2019. The number of clients has also increased to 2.1 million from 1.5 million during the same period.

The growth reflects rising investor interest in professional investment management and increasing demand for customised investment solutions.

However, despite this growth, PMS has expanded at a slower pace compared with competing investment products. Mutual fund assets have grown more than three times during the same period to ₹81.6 trillion. The proposed changes are expected to narrow this gap by allowing PMS providers to offer a wider range of products and making the structure more accessible to investors.

The proposed changes are expected to attract fresh allocations by existing investors and a new class of investors that may find the proposed products lucrative. Allowing overseas investments through PMS could be a major driver as investors currently have limited access to professionally managed international portfolios.

“A lot of investors do not have access to professionally managed overseas investments given the RBI cap on Mutual Funds. The proposal could open that door and allow domestic investors to truly diversify their portfolios through PMS,” said Pramod Gubbi, founder at Marcellus Investment Managers, a PMS firm.

The MF-PMS framework could also expand the addressable market. Investors who want advisory support for mutual fund selection but do not want to manage multiple schemes themselves could opt for such services. Lower entry requirements for MF-PMS may also encourage more distributors and investment professionals to enter the space.

“If the proposal is implemented, many mutual fund distributors may want to get a PMS license as execution will become easier under the new framework. MFDs, who had to get signatures on each investment in mutual funds from the client, will now be able to invest, redeem or switch between schemes with more ease. This could become the biggest push for PMS industry AUM within the proposed changes,” said Sushant Bhansali, chief executive officer at Ambit Asset Management.

The market regulator has recommended allowing independent fund managers to bring their own clients and manage client funds while ...