SEBI’s new PMS rules could redraw competition for affluent investors

According to fresh market updates, Market regulator SEBI's overhaul of the portfolio management services framework could propel PMS firms into a much broader part of India's wealth-management market. At the centre of it is the Portfolio Managers' Route for Investing in Mutual Funds (PRIM). It will allow portfolio managers to build client portfolios entirely out of mutual funds, ETFs, index funds and specialised investment funds, at a minimum ticket size of Rs 25 lakh, half the Rs 50 lakh threshold for conventional PMS.

The mechanics are straightforward enough. A portfolio manager under PRIM doesn't pick stocks; that stays with the underlying fund managers. What changes is who decides which schemes an investor owns, how much goes into each, and when that allocation shifts. It's a layer of decision-making that sits above the fund manager rather than inside it, and until now, nobody occupied it in a regulated, fee-based way except registered investment advisers.

That's the detail Aditya Agarwal, co-founder of Wealthy.in, thinks matters more than the ticket-size trimmed: PRIM opens up fee-based fund portfolio management, "previously available only to RIAs," to a much wider set of players. In effect, PMS firms and RIAs are now competing for the same affluent investor who wants professional fund selection without either a Rs 50 lakh PMS minimum or a pure advisory relationship.

For retail market participants specifically, the shift to direct plans is itself a cost advantage. Riddhiman Jain, Managing Director and Head of Investment Strategy and Solutions at Waterfield Advisors, pointed to a cluster of benefits built into the PRIM structure: softer costs from direct rather than regular plans, a single transparent fee capped at 1%, and a 25% cap on allocation to affiliated AMC schemes, which he stated "keeps fund selection honest." Underlying all of it, he further noted, is someone "accountable for allocation and rebalancing, year after year," a level of ongoing responsibility that didn't formally exist in this form before.

An industry calling this validation

PMS firms themselves have been unambiguous around what PRIM represents for their business. "This is a game-changing regulation," stated Dharmendra Jain, co-founder of Ionic Wealth, one that turns a portfolio advisor into something closer to a full asset allocator, with reach across IPOs, global investments, unlisted investment-grade debt and derivatives for risk management.

Vikas Khemani, Chairman of the Association of Portfolio Managers in India, went further, calling the move validation of years of industry lobbying: "greater innovation, wider participation, and stronger investor outcomes, without compromising on governance or transparency," he stated, adding that APMI now intends to work with SEBI on ironing out implementation details. Marking a hint that some of this is still being worked out in practice, not just on paper.

For at least one firm, the framework is additionally catching up to something already running in the market. Dezerv built a mutual-fund-only PMS in 2022, back when stock-based PMS was still the industry default, on a bet that Indian market participants could do better with professional allocation than on their own. That bet now manages Rs 8,674 crore with a four-year live track record. "Seeing SEBI create a formal category for this model through PRIM is the biggest validation our approach could have received," stated co-founder Sandeep Jethwani.

The problem PRIM is actually meant to solve

Jethwani's case for why this matters goes beyond the regulatory framing. Access to mutual funds, he argues, was never really the constraint for Indian market participants; discipline was. Dezerv's own research, drawn from more than 8 lakh portfolio reviews, found that over half of investor portfolios underperform their benchmarks, not because the funds they picked were bad but because of when and how they were used: entering after a firm run, spreading money across too many schemes, or bailing during volatility. "The gap is not access to products, but the quality and discipline of portfolio management," he stated. PRIM, in this reading, isn't primarily a distribution innovation: it's an attempt to put a professional, accountable decision-maker between the investor and their own worst instincts.

A wider toolkit, not just a new product

PRIM is the headline change, but SEBI expanded portfolio managers' toolkit well beyond it. They can now participate in IPOs and primary debt issuances outright. Discretionary PMS can put up to 10% of client AUM into investment-grade unlisted debt with client consent: flexibility that Vishal Trehan, Head of India Sales and COO for Broking and Clearing at Aikyam Capital Group, says lets managers "construct better risk-adjusted portfolios."

That allowance cuts two ways depending on the size of the portfolio, according to Jain of Waterfield. For larger portfolios, unlisted debt captures an illiquidity premium and new-offering pricing that listed markets rarely offer, but only for a manager who does the underlying work. "The spread only rewards the manager who earns it," he stated, pointing to cash flow visibility, security cover, covenants and a clear exit as the actual sources of that return. Framed this way, wider access helps different market participants differently: retail portfolios gain conflict-free construction, while larger ones gain contracted cash flows that are properly underwritten, which is a genuine reduction in risk rather than just a new return opportunity.

Derivatives exposure is capped at 1.25 times client AUM, and the foreign-investment basket has widened to cover listed overseas equity and debt, overseas funds, REITs and foreign government securities, within FEMA rules and the RBI's Liberalised Remittance Scheme.

There's already a large base of capital positioned to use these tools: PMS AUM has grown from Rs 18.07 lakh crore in April 2019 to Rs 42.61 lakh crore as of May 2026, with the number of registered portfolio managers rising from 226 to 515 over the same stretch.

The operating model is loosening too. A new category of Independent Fund Managers can now run client portfolios alongside a registered portfolio manager, letting PMS firms bring in outside talent without that talent needing to build its own platform, though liability still sits with the registered manager. Entry barriers have eased on the other end as well: graduates can qualify as principal officers, and the dealing-room requirement has been relaxed for managers below ₹100 crore in AUM, a change SEBI says covers roughly half the industry.

None of this comes without guardrails, Jyoti Bhandari Chandra, founder and CEO of Lovak Capital, was careful to note. Net-worth requirements and a mandated separation of PRIM activities from a firm's other business lines are meant to keep accountability intact even as the product mandate widens. SEBI has capped PRIM investments in affiliated or group AMC schemes at 25%, and portfolio managers doubling as mutual fund distributors will have to keep their MFD and PRIM clients and operations separate, barring an exception for accredited market participants.

Easier accreditation, wider access to private markets

A separate change could matter just as much over time. SEBI has introduced a new accreditation route based on demonstrated market experience rather than income or overall net worth, using a threshold of Rs 5 crore in securities-market assets for individuals and Rs 20 crore for body corporates. Portfolio managers can now accredit market participants directly, removing the need to route every case through a separate accreditation agency.

Jain stated this addresses a real friction point for Waterfield's own client base. Many clients hold significant wealth in listed equity, bonds and funds but have struggled with the paperwork needed to access AIFs and other structures built for accredited market participants. With that friction reduced, he stated, more informed domestic capital backed by market participants' own demonstrated market experience should be able to reach private markets.

What the fee cap doesn't tell you

The one number every source cites: a 1% set management fee cap under PRIM, with performance fees additionally allowed. It is easy to mistake for a ceiling on total cost. It isn't. The underlying mutual fund schemes carry their own expense ratios on top, meaning the real question for an investor isn't whether PRIM is cheap, but whether an extra layer of fees for allocation and monitoring is worth paying above what the funds themselves already cost. That calculation, more than the regulatory permissioning itself, will decide how much of the addressable market PRIM actually converts.

The more interesting reaction may come from RIAs and distributors who at present hold the fee-based fund-allocation space PRIM has just opened up to rivals.