SEBI Proposes MF-Only PMS Framework to Broaden Access to Professional Wealth Management

The Securities and Exchange Board of India (SEBI) has published a discussion paper suggesting a structure for Mutual Fund-only Portfolio Management Services (MF-PMS). This initiative may well go a long way in changing the dynamics of investment management for India’s increasingly mass-affluent population.

The consultation paper, dated July 23, 2026, is part of a comprehensive review of the SEBI (Portfolio Managers) Regulations, 2020. The regulator has invited public comments on the proposals, with the deadline for submissions set at August 13, 2026.

What Is MF-PMS?

At its core, the proposed framework creates a new, lighter-touch category of Portfolio Management Services that operates exclusively through mutual funds. As SEBI stated in the consultation paper, the framework is designed "to enable portfolio managers intending to exclusively manage client investments only in direct plans of Mutual Fund schemes including Exchange Traded Funds (ETFs) and Specialised Investment Funds (SIFs)." 

In practical terms, this means a client hands over a corpus to a registered MF-PMS manager, who then constructs and manages a personalised portfolio using direct mutual fund plans, rather than individual stocks or bonds. The investor retains the cost benefits of direct plans while gaining access to professional portfolio management.

Lower Entry Barriers; the Key Differentiator

The most significant aspect of this proposal is the reduction in minimum investment threshold. The proposed MF-PMS framework would lower the minimum investment requirement to ₹25 lakh, down from the current ₹50 lakh applicable to regular PMS. The minimum net worth requirement for MF-PMS applicants has also been proposed at ₹2 crore, compared to ₹5 crore for a full-fledged PMS licence. 

This halving of the ticket size is a deliberate effort to tap into the emerging HNI segment, investors who have crossed the ₹25 lakh threshold in investible surplus but may not qualify for or require a conventional PMS arrangement.

Applicants intending to operate under this framework would need to obtain a separate registration as an MF-PMS, subject to simplified eligibility norms. Qualification requirements for the principal officer have also been relaxed, NISM certification along with a graduation degree in any discipline and two years of experience in the securities market would suffice. 

Fee Structure and Conflict of Interest Safeguards

The proposed management fee cap for MF-PMS has been set at 2.5% of AUM. Managers may also charge a performance fee or a hybrid fee model, subject to explicit client consent. 

On the conflict of interest front, SEBI has been particular. To avoid conflicts of interest, the regulator has proposed that entities offering MF-PMS maintain a clear separation between their distribution and portfolio management activities. Additionally, SEBI has proposed waiving exit loads for clients exiting the PMS, as charging them would amount to double charging. 

Broader PMS Overhaul

The MF-PMS proposal sits within a larger reform package that significantly widens the investment universe for portfolio managers.

Furthermore, the consultation paper seeks to permit the investment of client funds into foreign equities, debt instruments, and mutual funds, within the ambit of FEMA and LRS restrictions. Furthermore, investment in 'to-be-listed' domestic securities is also sought to be permitted to increase the universe of investments, while discretionary portfolio managers may be permitted to invest up to 10% of the client’s AUM in investment-grade unlisted debt securities.

On the derivatives front, SEBI plans to give portfolio managers greater flexibility by allowing total exposure of up to 1.25 times a client's AUM, with unhedged short positions capped at 50% of AUM and total options premium paid and received capped at 10% of AUM. 

Smaller portfolio managers have also been considered. PMS firms managing assets below ₹100 crore may be exempt from dealing-room requirements. 

Industry Context

The proposals come against the backdrop of strong growth in the PMS industry. PMS assets have more than doubled in six years, from ₹18.07 lakh crore in April 2019 to ₹42.61 lakh crore in May 2026 and the number of registered portfolio managers has risen from 226 in 2020 to 515 as of May 31, 2026. The client base also expanded from 1.5 lakh in April 2019 to 2.19 lakh in May 2026. 

Conclusion

The MF-PMS framework, if finalised, could open a regulated and professionally managed investment channel for a segment of investors currently sitting between mutual fund SIPs and traditional PMS. It provides a chance for portfolio managers to increase their ambit without having to make any PMS arrangement which requires much in terms of infrastructure. Distributors and RIAs get another avenue to do business within the regulatory framework.

SEBI Consultation Paper should be reviewed by all stakeholders and their views submitted to SEBI before August 13, 2026. The regulations will be finalized once the views of the stakeholders are assessed by SEBI.