SEBI Approves PRIM Route Allowing Portfolio Managers to Invest ₹25 Lakh Minimum in Direct Mutual Funds

The Securities and Exchange Board of India (SEBI) has cleared a new framework that allows portfolio managers to manage client investments exclusively through mutual fund products. Known as the Portfolio Managers Route for Investing in Mutual Fund units (PRIM)—or MF-PMS—the initiative was cleared at the market regulator's 215th board meeting in Mumbai as part of the new SEBI (Portfolio Managers) Regulations, 2026, which replaces the existing 2020 framework.

The newly introduced route significantly lowers the barrier to entry for professional wealth management in India. While conventional discretionary and non-discretionary Portfolio Management Services (PMS) mandate a minimum ticket size of ₹50 lakh, the PRIM route slashes the minimum entry requirement to ₹25 lakh.

Key Permissible Instruments and Operational Rules

Under the PRIM framework, portfolio managers are permitted to curate customized strategies using domestic pooled investment products. The permissible universe includes:

• Direct plans of mutual fund schemes
• Exchange-traded funds (ETFs)
• Index funds
• Specialised Investment Funds (SIFs) managed by Indian asset management companies (AMCs)

To protect investor interests and maintain operational viability, SEBI has incorporated multiple structural guardrails:

• Fee Structure: Fixed management fees charged by portfolio managers under PRIM are capped at 1% of the client's assets under management (AUM). Performance-based fee structures are also permitted.
• Conflict of Interest Restrictions: Exposure to schemes managed by an AMC affiliated with, or belonging to the same corporate group as, the portfolio manager is capped at 25% of the client's portfolio.
• Capital and Entity Thresholds: Entities that seek registration solely to operate within PRIM are subject to a relaxed minimum net-worth requirement of ₹2 crore. Existing portfolio managers can also offer PRIM strategies under a separate investment approach.
• Distributor Segregation: Mutual fund distributors looking to provide services under PRIM must separate their distribution operations and clients from their PRIM business, with an exemption provided only for accredited investors.
• Exit Loads and Qualifications: Exit loads have been waived under the route, and eligibility criteria for principal officers have been simplified to allow chartered accountants, CFAs, or graduates with two years of securities market experience to qualify alongside relevant NISM certifications.

Industry Reaction and Market Impact

Market participants and wealth managers have welcomed the reform as an important milestone in expanding professional investment advisory services in India.

"The introduction of PRIM meaningfully widens access and brings more investors into a well-regulated, professionally managed framework," noted Vikas Khemani, Chairman of the Association of Portfolio Managers in India (APMI).

Financial planners point out that the framework creates a distinct intermediate tier for mass-affluent investors. While mutual fund scheme managers make stock-selection and security-level decisions within their portfolios, a PRIM portfolio manager operates an asset allocation layer above them—selecting the optimal mix of equity, debt, and thematic funds, determining fund houses, and managing active rebalancing based on client mandates.

Beyond PRIM, SEBI's broader overhaul of portfolio manager regulations grants conventional PMS players expanded room to invest in initial public offerings (IPOs), primary debt market issuances, foreign securities such as overseas REITs and index funds, and up to 10% in unlisted investment-grade debt with client consent.

Tags: SEBI Portfolio Management Services Mutual Funds APMI Wealth Management