Investment industry advocates for SEBI to lower the ₹50-lakh minimum investment barrier

The Securities and Exchange Board of India (SEBI) has been actively working on reforming the Portfolio Management Services (PMS) industry. One of the key changes being considered is a lowering of the minimum investment threshold for PMS, currently set at ₹50 lakh, to ₹25 lakh or lower. This request has been made by the Association of Portfolio Managers in India (APMI), aiming to make PMS more accessible to a wider range of investors.

The PMS industry, comprising around 470 SEBI-registered managers, collectively oversees about ₹3.8 lakh crore in assets. However, the high entry barrier for PMS has limited access to this service to only wealthy investors, according to sources. The industry has faced increased competition since April with the launch of Specialised Investment Funds (SIFs), which require only ₹10 lakh as the minimum investment.

SIFs offer flexible strategies with stronger safeguards compared to PMS and Alternative Investment Funds (AIFs), making them a compelling alternative. Quant Mutual Fund is the first asset management company to receive SEBI's approval under the new SIF framework and plans to launch the first product, a SIF Equity Long-Short Fund, in September. Several other mutual fund houses are in the process of securing the regulator's approval for the SIF segment and are preparing to launch schemes under the new asset class.

However, the specific companies planning to launch schemes under the "SIF Equity Long-Short Fund" category as per SEBI's new SIF regulations have not been publicly disclosed.

PMS has unique advantages such as customised mandates and direct ownership of securities, but these advantages are not enough to compete with the lower investment requirements of other investment vehicles. The APMI has also requested SEBI to simplify know-your-customer (KYC) norms for non-resident investors, aiming to streamline the onboarding process for market participants.

SEBI chairman Tuhin Kanta Pandey has stated that the regulator is working with APMI on reforms. He emphasized that clients must understand both the risks and bespoke benefits before investing. He also cautioned PMS providers against exaggerated performance claims.

Currently, the minimum threshold for PMS stands at ₹50 lakh, a rise from ₹25 lakh, as per a January 2020 SEBI decision. No new information about the minimum investment threshold for SIFs was provided in this paragraph. The industry also faces challenges such as country-specific verification hurdles and two-factor authentication, which can stretch onboarding timelines for many market participants.

As the PMS industry evolves, it will be interesting to see how these reforms impact the market and make investment opportunities more accessible to a wider range of investors.

Investment industry advocates for SEBI to lower the ₹50-lakh minimum investment barrier