# Mint Explainer | Will Sebi's proposed changes lift the portfolio management industry? — retained record

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source: [news](https://highsignal.app/data/news) (news:india-mint-markets)  published 2026-07-25 00:43 ingested 2026-07-25 07:59

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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
What are the proposed changes?
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.
Why were the changes needed?
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.
Will the proposals give a boost to the industry?
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.
Is consolidation on cards for PMS firms?
The market regulator has recommended allowing independent fund managers to bring their own clients and manage client funds while operating under the umbrella of a single Sebi-registered portfolio manager.
Fund managers expect the move to encourage consolidation among smaller PMS players. The ability to separate portfolio management from infrastructure and compliance functions could allow such firms to reduce operating costs and focus on investment management.
“A lot of PMS firms may become leasing structures. The move could add new revenue streams for bigger PMS providers as they can rent their operating and compliance infrastructure to portfolio managers who want to just focus on portfolio management and lower entry barrier for new independent fund managers,” said Gubbi.
He added that while there could be consolidation of PMS licences, the number of portfolio managers could become more fragmented as newer managers get easier access to the ecosystem.
Why does the largest demand still hang in limbo?
Portfolio managers for several years have been making representations to the market regulator to reduce the minimum investment threshold for PMS from the current ₹500,000 limit. The change is expected to make the segment more competitive with counterparts such as SIFs that enjoy a ticket size of ₹100,000 and compete for the same pool of wealthy investors.
However, the demand has gone unnoticed in the draft paper. Sebi had increased the minimum investment limit from ₹250,000 to ₹500,000 in 2020.
Contrary to industry demands, Sebi has proposed that existing PMS investors who were allowed to continue with a ₹250,000 investment will now have to increase their investment to the permissible minimum limit within 36 months of the new rules coming into effect.
With a lower entry barrier, investors would be able to deploy their money in multiple PMS schemes providing diversification similar to that seen in mutual funds.
“The industry demand to reduce investment threshold cannot be made up for. The biggest missing point was allowing investors to enter the segment if they have put in ₹50 lakhs across PMS firms,” said Bhansali.
“Right now, PMS investors mostly have exposure to 1-2 schemes due to the high investment limit applicable for accounts with each PMS player. This is very low compared to a retail Mutual fund investor who generally has exposure to several schemes,” he added.
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