The framework is aimed at investors with sizable MF portfolios, who want professional asset allocation, fund selection, execution and portfolio rebalancing, said an industry player
SEBI's proposal to create a dedicated Mutual Fund-only portfolio management Service (MF-PMS) category seeks to carve out a new space between traditional portfolio management and investment advisory, with portfolio managers saying the product's differentiation will lie in discretionary portfolio management, asset allocation and execution.The regulator has a separate registration category under which portfolio managers would exclusively manage investments in the direct plans of mutual funds, exchange-traded funds (ETFs) and specialised investment funds (SIFs).Bhavin Shah, Founder and Portfolio Manager at Sameeksha Capital and a board member of the Association of Portfolio Managers in India (APMI), said, “It is not clear what gap it serves because MF-PMS is already possible through the regular PMS route…the question is what incremental value do they add over what they are already able to do.”SEBI has proposed that the same client cannot be serviced through the distribution mode as well as through the MF PMS mode, even if these two services are segregated by the company offering both. “So any wealth manager/ mutual fund distributor wanting to offer MF PMS to their existing clients on-boarded through the regular mode of mutual funds, will have to convince the client to switch completely from the distributor mode account to MF PMS,” he said.The proposed fee structure also results in investors bearing both the underlying mutual fund expense ratio and the PMS management fee, he said.Biharilal Deora, Chairman of APMI, said the value proposition lies in discretionary portfolio management rather than access to mutual funds alone. The framework is aimed at investors with sizable mutual fund portfolios, who want professional asset allocation, fund selection, execution and portfolio rebalancing, without having to make every investment decision themselves, he said.“Its value would be evident in customised risk-based portfolio construction and ongoing risk management, rather than merely packaging a basket of popular mutual funds, making it far superior to traditional FOF,” Deora said.APMI is preparing its representation on the draft paper and is expected to seek clarifications on disclosures, conflict-of-interest safeguards, client suitability, corpus and net-worth requirements before the framework is finalised, Deora said.Sandeep Jethwani, Co-founder of Dezerv said, “It introduces a tailored subcategory for mass-affluent investors who prioritise direct plans and low costs, but wish to offload the entire operational burden to a manager who holds a discretionary mandate.”Jethwani said the relaxed eligibility norms could also expand the provider base, estimating that 15-18 per cent of registered investment advisers could become eligible for a portfolio manager licence under the proposed framework.Unlike conventional PMS, the proposed category will invest only in the direct plans of mutual funds, ETFs and SIFs, with a lower minimum investment threshold of ₹25 lakh from ₹50 lakh.Shah said the minimum investment threshold for traditional PMS should instead have been reduced to ₹10 lakh, adding that the increase to ₹25 lakh and later ₹50 lakh had left room for unlicensed operators to fill the gap.SEBI has also proposed allowing portfolio managers to invest in overseas securities, to-be-listed securities and investment-grade unlisted debt, while providing greater flexibility in the use of exchange-traded derivatives and simplifying compliance requirements.Published on July 28, 2026
