India's markets regulator, the Securities and Exchange Board of India (SEBI), has proposed significant changes to its Portfolio Managers Regulations, aiming to expand investment avenues and simplify compliance. Key proposals include permitting portfolio managers to invest client funds in overseas listed equities, listed debt securities, and overseas mutual funds. These overseas investments would be subject to FEMA limits and require explicit client consent, bringing portfolio managers in line with mutual funds and alternative investment funds that already have such permissions.
SEBI is also proposing to allow discretionary portfolio managers to invest up to 10% of their client's assets under management (AUM) in investment-grade unlisted debt securities. Another major initiative is the creation of a dedicated mutual fund-only PMS (MF-PMS) category, which would focus on direct plans of mutual funds, including ETFs. This new framework proposes a significantly lower minimum investment threshold of $25 lakh, down from the current $50 lakh required for other PMS offerings, making professionally managed investments more accessible.
The proposed overhauls come after a review of the sector, which has seen substantial growth. Assets managed by India's portfolio management services industry have more than doubled, increasing from $18.07 trillion (or $1.807 lakh crore) in April 2019 to $42.61 trillion (or $4.261 lakh crore) as of May 31, 2026. This rapid expansion, along with increasing investor sophistication and demand for personalized solutions, prompted SEBI to review its existing regulations. Stakeholders have until August to provide their feedback on these proposals.
The regulator also aims to enhance the application of derivatives strategies and is exploring a model where independent fund managers operate under a registered platform. For smaller portfolio managers with less than $1 billion (or $100 crore) in AUM, there's a proposal for flexibility regarding separate dealing rooms. Overall, the changes are intended to improve the ease of doing business and provide greater flexibility to portfolio managers while balancing investor protection concerns, particularly regarding investments in unlisted debt and pre-IPO securities.
