SEBI’s MF-Only PMS: Lower Entry for Affluent Investors
By Business Desk
SEBI proposes a new mutual fund-only PMS, lowering the minimum investment to Rs 25 lakh to attract affluent investors and make managed portfolios more accessible.
The Securities and Exchange Board of India (SEBI) has proposed a new mutual fund-only Portfolio Management Service (MF-PMS) category. This framework aims to attract affluent investors by significantly lowering the minimum investment threshold.
Key Changes in the Proposed Framework
Under this new proposal, portfolio managers would exclusively invest client funds into direct plans of mutual funds. This includes exchange-traded funds (ETFs) and specialised investment funds (SIFs).
The core objective is to make professionally managed mutual fund portfolios more accessible. This is achieved by reducing the entry barrier for investors.
- Minimum investment threshold reduced from Rs 50 lakh to Rs 25 lakh.
- Portfolio manager net worth requirement drops from Rs 5 crore to Rs 2 crore.
SEBI also suggests simplified certification criteria for principal officers operating under this new category. Furthermore, the requirement for an additional employee and a dedicated dealing room would become optional for these managers.
Fee Structure and Investor Advantages
Regarding fees, the proposal allows for a fixed fee of up to 2.5% of the client’s assets under management. Portfolio managers also have the option to combine fixed fees with performance-based charges, provided they secure client consent.
A significant benefit for investors is the exemption of the MF-PMS framework from exit loads. This ensures that investors will not face double charges on their investments, enhancing overall cost efficiency.
Industry Perspectives and Next Steps
Industry experts have largely welcomed SEBI’s initiative. A Balasubramaniam of Aditya Birla Sun Life Mutual Fund and Sandeep Tandon of Quant Mutual Fund both described the move as innovative and tax-efficient.
They anticipate that the framework will greatly benefit affluent investors. It also promises increased flexibility for registered investment advisers and mutual fund distributors.
Distributors operating within this new framework must maintain an arm’s-length relationship between their distribution and MF-PMS activities. They are also required to ensure clear client-level segregation of services.
SEBI has opened the proposal for public feedback. Stakeholders can submit their comments until August 13, indicating the regulator’s commitment to broad consultation.