SEBI has announced a new type of Portfolio Management Service called Mutual Fund‑only PMS (MF‑PMS). The plan would let investors receive professional portfolio management while investing only through mutual funds, ETFs and specialised investment funds.
The proposal comes after industry demand for a simpler PMS framework with lower entry barriers. SEBI said that while portfolio managers can already invest client money in mutual funds, there is a growing need for a dedicated structure focused exclusively on mutual fund investments.
A. Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC Ltd, said, "India is still a country where professional wealth management is evolving. Therefore, reforms like these are coming at the right time. They can provide opportunities for many professionals who want to build advisory businesses but were otherwise constrained."
The goal is to serve mass‑affluent investors who want professional management but only through mutual funds. By limiting investments to mutual fund schemes, ETFs and SIFs, MF‑PMS aims to combine diversification with customised portfolio construction.
One of the biggest changes is the lower minimum investment. Traditional PMS products require Rs 50 lakh, which limits them to high‑net‑worth individuals. Under MF‑PMS, the minimum would be Rs 25 lakh, opening the market to a wider base of affluent investors.
MF‑PMS would not allow portfolio managers to trade individual stocks or bonds. Instead, managers would invest only in direct mutual fund plans, ETFs and SIFs, giving investors the benefits of diversification while still receiving professional oversight.
The proposal also introduces new safeguards. Portfolio managers offering MF‑PMS would need a separate registration. Existing PMS providers could launch MF‑PMS through a separate investment approach. The net worth requirement would drop to Rs 2 crore from Rs 5 crore, and qualification rules for principal officers would be simplified.
Regarding fees, SEBI proposes capping the fixed management fee at 2.5% of assets under management. Managers may also charge performance‑linked fees or a mix of fixed and performance fees, but only with the client’s explicit consent. Balasubramanian noted that the final fee structure could change after industry comments.
The regulator plans to exempt MF‑PMS from existing PMS exit‑load provisions. This would prevent investors from paying exit charges twice—once at the PMS level and again within the underlying mutual fund.
To avoid conflicts of interest, SEBI requires that if an entity is both a mutual fund distributor and an MF‑PMS provider, it must keep the two businesses in separate divisions. The same client cannot receive both distribution services and MF‑PMS from the same entity.
For investors, MF‑PMS sits between traditional mutual fund investing and conventional PMS. It offers professional oversight and customised management while retaining the diversification and lower risk of mutual funds.
The proposal is still at the consultation stage. The final framework, including investment limits, fee structures and operational conditions, may change after SEBI reviews public comments.