SEBI Proposes Wider Investment Mandates and Lower Thresholds for Portfolio Managers
India’s market regulator has unveiled proposals to broaden the investment scope of portfolio managers and lower entry barriers, a move designed to accommodate the sector's rapid asset growth and evolving investor demands.
The Securities and Exchange Board of India has proposed a comprehensive overhaul of portfolio manager regulations to broaden investment mandates and reduce entry barriers. The regulatory shift follows a period of explosive growth in the sector, with assets under management surging to ₹42.61 lakh crore in May 2026 from ₹18.07 lakh crore in April 2019.
In a discussion paper released Thursday, the regulator noted that the review addresses the "increasing sophistication of investors" and a "growing demand for more personalised solutions and diverse investment portfolio." These changes aim to modernize a framework that has struggled to keep pace with market expansion.
Under the new proposals, portfolio managers would gain permission to allocate client funds into to-be-listed securities, investment-grade unlisted debt, and overseas markets. This expanded mandate provides wealth managers with crucial tools to construct more resilient, globally diversified portfolios for high-net-worth individuals.
SEBI also introduced a simplified mutual fund-only PMS category, known as MF-PMS. Managers in this dedicated segment would exclusively handle direct mutual fund schemes, exchange-traded funds, and specialised investment funds.
To stimulate participation in this new category, the minimum investment threshold would be halved to ₹25 lakh from the existing ₹50 lakh requirement. Additionally, the minimum net worth prerequisite for applicants would drop to ₹2 crore from ₹5 crore, potentially inviting a new wave of boutique firms into the regulated space.
The framework also grants greater flexibility regarding exchange-traded derivatives. Total derivatives exposure would face a cap of 1.25 times a client’s assets under management, while unhedged short exposure via equity derivatives would be limited to 50 percent of AUM, contingent on explicit client approval.
Operational burdens would be eased for smaller entities. Portfolio managers servicing fewer than 10 clients or holding less than ₹100 crore in AUM would no longer be required to maintain a dedicated dealing room.
Further administrative relaxations include permitting demat account portability and reducing the necessity of obtaining powers of attorney from clients. The regulator also proposed allowing independent fund managers to operate under the umbrella of registered portfolio managers, fostering greater talent mobility within the industry.
For investors and market professionals, these reforms signal a maturing regulatory environment that prioritizes flexibility alongside risk management. By lowering barriers and expanding permissible asset classes, the regulator is positioning the Indian portfolio management sector to better compete with global wealth management standards.
