Sebi clears PRIM route for PMS players to invest in mutual funds, SIFs; Rs 25 lakh minimum ticket

The Securities and Exchange Board of India (SEBI) board has cleared the introduction of a Portfolio Managers’ Route for Investing in Mutual Fund Units (PRIM), allowing portfolio management services (PMS) players to invest clients’ money in direct plans of mutual fund schemes, including exchange-traded funds (ETFs), index funds and specialised investment funds (SIFs).

Under the new framework, an existing portfolio manager will be able to offer PRIM as a separate investment approach, with a minimum ticket size of Rs 25 lakh.

The move could expand the scope of PMS beyond direct equity and other traditional portfolio-management strategies by allowing managers to construct professionally managed portfolios using mutual fund and SIF products, suggest experts.

The regulatory change also comes at a time when investors have access to a growing range of mutual fund products, but portfolio construction, asset allocation and periodic rebalancing remain important challenges.

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PMS access widens through mutual fund route

Commenting on the development, Vikas Khemani, Chairman, Association of Portfolio Managers in India (APMI), said the SEBI board’s decision marks a significant step forward for the PMS industry.
According to Khemani, allowing portfolio managers to offer mutual fund and SIF-based strategies at a Rs 25 lakh ticket size could widen access to professionally managed portfolios while keeping the framework within a regulated structure.

He added that the industry views the move as a step towards greater innovation and participation, while maintaining focus on governance and transparency.

The PRIM framework will allow PMS players to invest in direct plans of mutual funds, including ETFs, index funds and SIFs offered by Indian asset management companies. This gives portfolio managers another route to construct portfolios without necessarily relying on direct stock selection.

From product selection to portfolio management

Sandeep Jethwani, Co-founder, Dezerv, said the significance of PRIM goes beyond simply providing investors with another route to access mutual funds.

According to Jethwani, access to mutual funds is no longer the primary challenge for investors. The bigger challenge is deciding which funds to own, how much to allocate, when to rebalance and how to remain disciplined through different market cycles.

Jethwani cited Dezerv’s research based on more than 8 lakh portfolio reviews, which he said showed that over half of investor portfolios underperformed their benchmarks.

He attributed this gap, in part, to behavioural and portfolio-construction issues, including investors entering funds after periods of strong performance, holding overlapping funds, misallocating capital or struggling to remain invested during market volatility.

“PRIM changes this by putting these decisions with a regulated portfolio manager,” Jethwani said, adding that the framework creates clearer accountability for fund selection, allocation, rebalancing and navigating market cycles.

MF-only PMS model gets regulatory recognition

The move could also provide greater visibility to PMS models that use mutual funds as the primary investment vehicle rather than relying predominantly on individual stocks.

Jethwani noted that Dezerv launched a mutual-fund-only PMS in 2022, at a time when stock-based PMS was the more common industry model. The firm believed professional portfolio management could help investors use mutual funds more effectively across market cycles.

He described SEBI’s decision to create a formal route for such strategies as a significant validation of the model.

Dezerv said its flagship mutual-fund-only PMS strategies currently manage Rs 8,674 crore, with a four-year live track record.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)