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Mumbai: The Portfolio Management Services (PMS) industry is making a fresh pitch to the Securities and Exchange Board of India (SEBI) to reduce the minimum investment threshold of ₹50 lakh required for investors to participate in PMS offerings. The request, led by the Association of Portfolio Managers in India (APMI), aims to make PMS a more accessible and attractive investment avenue for a wider pool of investors, particularly at a time when competing products like Specialised Investment Funds (SIFs) are entering the market.
Demand for Lower Ticket Size
Industry sources reveal that APMI has formally approached SEBI with a proposal to bring down the minimum ticket size. A senior official, who is part of the APMI board and also represents a top PMS provider, explained that the current entry barrier of ₹50 lakh limits the industry’s ability to expand its investor base.
“The ₹50 lakh minimum investment threshold has been acting as a roadblock for many investors who are willing but unable to commit such large sums. By reducing the ticket size, PMS can become a viable investment alternative for mass affluent investors, thereby driving growth,” the official said.
Another industry insider, who requested anonymity, cautioned that PMS inflows may come under increasing pressure following the introduction of Specialised Investment Funds (SIFs). “If PMS continues with such a high entry barrier, many investors might gravitate toward newer categories like SIFs, which offer more flexibility. A reduction in ticket size could help PMS remain competitive and relevant,” the official added.
Background of the Current Threshold
The ₹50 lakh minimum investment limit was introduced by SEBI in January 2020, when it doubled the earlier threshold of ₹25 lakh. The move was aimed at ensuring that PMS investors were financially capable of bearing the risks associated with actively managed portfolios, which often include concentrated bets and higher volatility compared to mutual funds.
While the intent was to safeguard investors, industry participants argue that the threshold now seems misaligned with the evolving investment landscape. With rising financial literacy and growing appetite for customised wealth management, many investors in the ₹25–50 lakh bracket are keen to access PMS strategies but remain locked out due to regulatory constraints.
Competition from New Products
The push for lower thresholds comes at a time when the Indian asset management space is witnessing innovation. The recent launch of SIFs (Specialised Investment Funds) by Quant Mutual Fund has opened a new category for investors, offering differentiated strategies including long-short equity models. Experts believe that such products could attract investors who otherwise might have opted for PMS.
In this context, PMS players feel the urgency to revisit entry requirements. By reducing the minimum ticket size, PMS could position itself as an attractive middle ground between mutual funds (which have very low minimums) and alternative investment funds (AIFs) (which cater largely to ultra-high-net-worth individuals with a minimum investment of ₹1 crore).
SEBI’s Willingness to Engage
The industry’s hopes received a boost earlier this month when SEBI Chairman Tuhin Kanta Pandey, addressing the APMI Conclave, indicated that the regulator is in active dialogue with PMS players to introduce changes. While he did not commit to any specific reduction in threshold, the statement reflected SEBI’s willingness to consider structural adjustments in consultation with the industry.
Market observers note that any decision will have to strike a balance between enhancing accessibility for investors and ensuring adequate safeguards against mis-selling or undue risks.
Additional Concerns: NRI Onboarding Challenges
Apart from the demand for a lower entry point, PMS providers are also seeking simplification of the KYC process for Non-Resident Indians (NRIs). Many industry players argue that current protocols are cumbersome and often incompatible with international systems.
For instance, requirements such as two-factor authentication pose difficulties in certain countries where digital infrastructure is limited. One official highlighted that onboarding timelines for NRI clients can sometimes stretch from one week to as long as two months, with countries like Nigeria posing particular challenges due to their verification protocols.
This delay, they argue, hampers the ability of PMS providers to tap into the growing pool of global Indian investors who are keen to channel funds into India’s capital markets.
Implications for Investors
If SEBI agrees to lower the minimum investment requirement, it could democratize access to PMS products, attracting a broader base of mass affluent investors. PMS offers several advantages, including:
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Customisation: Portfolios are tailored to investor goals, unlike pooled vehicles such as mutual funds.
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Active Management: Experienced portfolio managers take concentrated calls that can potentially deliver higher alpha.
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Transparency: Investors receive direct ownership of securities and detailed transaction reporting.
However, industry experts also caution that PMS carries higher risks than mutual funds due to lower diversification. As such, while reducing ticket size would broaden access, investor education and regulatory safeguards will remain critical.
The Road Ahead
The APMI-SEBI dialogue reflects a broader trend of India’s capital markets evolving to meet diverse investor needs. With the mutual fund industry already surpassing ₹60 lakh crore in assets under management and new categories like SIFs emerging, PMS providers see regulatory flexibility as vital for their survival and growth.
Whether SEBI will agree to reduce the ticket size remains to be seen, but the conversation signals a new chapter for the PMS industry. For investors, it could mean greater choice, better accessibility, and more innovative wealth management solutions in the years ahead.
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