SEBI Overhauls PMS Framework with ₹25 Lakh PRIM Route and Expanded Global Asset Mandates

In a comprehensive revamp aimed at democratising professional wealth management, the Securities and Exchange Board of India (SEBI) has approved the SEBI (Portfolio Managers) Regulations, replacing the existing 2020 framework. The sweeping overhaul halves the minimum ticket size for mutual fund-focused portfolios, permits portfolio managers to invest client capital overseas, and streamlines compliance across the asset management industry.

The industry's assets under management (AUM) expanded from ₹18.07 lakh crore in April 2019 to ₹42.61 lakh crore by May, while the client base rose from 1.5 lakh to 2.19 lakh across 515 registered portfolio managers. To support this rapid expansion, the market regulator simplified its PMS rulebook, reducing its volume by 53% from 70 pages to 33 pages.

The ₹25 Lakh PRIM Route: Bridging Mutual Funds and PMS

The centerpiece of the revised regulations is the Portfolio Managers Route for Investing in Mutual Fund Units (PRIM). While the entry barrier for conventional discretionary PMS remains unchanged at ₹50 lakh, the PRIM route cuts the minimum investment threshold in half to ₹25 lakh:

• Direct Plan Focus: PRIM portfolios will invest strictly in direct plans of Indian mutual fund schemes, exchange-traded funds (ETFs), index funds, and Specialised Investment Funds (SIFs).
• Fee Structure and Caps: Fixed management fees under PRIM are capped at 1% of client AUM, though managers can also adopt performance-based fee structures.
• Conflict Safeguards: Portfolio managers are barred from allocating more than 25% of a client’s portfolio to schemes managed by an affiliated or group asset management company (AMC).
• Lower Capital Requirements: New applicants intending to operate solely through the PRIM route require a minimum net worth of ₹2 crore, down from the standard ₹5 crore requirement. Exit loads under the PRIM route have also been waived.

Wider Investment Universe and Global Mandates

Beyond lowering entry thresholds, SEBI has significantly widened the investment horizons of registered portfolio managers operating both discretionary and non-discretionary mandates:

• Primary Market Access: Portfolio managers can now participate directly in initial public offerings (IPOs) and primary issuances of debt securities on behalf of clients.
• Overseas Allocation: PMS managers can now allocate client funds to listed foreign equities, foreign debt instruments, overseas real estate investment trusts (REITs), international mutual funds, and foreign government securities under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). Previously, portfolio managers were restricted to domestic-listed securities.
• Unlisted Debt: Discretionary portfolio managers can allocate up to 10% of a client's AUM into investment-grade, unlisted non-convertible debentures, subject to explicit investor consent.
• Derivatives Flexibility: Derivatives exposure across portfolios can now extend up to 1.25 times the client’s AUM, facilitating enhanced hedging and liquidity management.

Independent Fund Managers and Operational Relief

To promote institutional entrepreneurship, SEBI introduced the concept of Independent Fund Managers (IFMs). Individual fund managers meeting principal officer qualifications can manage client portfolios using the operational and dealing infrastructure of a registered portfolio manager, while the registered firm retains regulatory accountability and custody control.

For smaller operators, dealing-room requirements have been relaxed for PMS firms with an AUM under ₹100 crore, providing compliance relief to nearly 48% of existing registered entities.

For Indian investors, the new framework fills a long-standing gap between standard retail mutual funds and high-ticket direct equity PMS. Affluent households crossing the ₹25 lakh portfolio mark can now access disciplined, active rebalancing and multi-asset allocation through regulated portfolio managers without having to navigate multiple DIY direct mutual fund platforms.

Tags: SEBI Portfolio Management Services Mutual Funds Wealth Management APMI Reserve Bank of India