SEBI has approved new regulations allowing a lower entry barrier of ₹25 lakh for Portfolio Management Services focused on mutual funds, ETFs, and index funds. The new 'PRIM' route caps management fees at 1% and aims to expand professional investment access to more investors.
The Securities and Exchange Board of India (SEBI) has officially approved the new 'SEBI (Portfolio Managers) Regulations, 2026,' replacing the previous 2020 framework. This update introduces the 'Portfolio Managers Route for Investing in Mutual Fund units,' commonly referred to as the PRIM route, which significantly lowers the minimum investment ticket size to ₹25 lakh. This move is designed to make professional wealth management services accessible to a broader base of mass-affluent investors who were previously restricted by the standard ₹50 lakh minimum threshold for traditional PMS.
Under the new PRIM framework, portfolio managers can build investment baskets focused on direct mutual fund units, exchange-traded funds, and index funds. To ensure these services remain cost-effective for smaller ticket sizes, SEBI has capped the fixed management fee at 1% of the client's assets under management. Furthermore, new players looking to enter the market exclusively through this PRIM route must maintain a minimum net worth of ₹2 crore, setting a clear bar for market participants.
Beyond the PRIM route, the regulator has granted more flexibility to the broader PMS sector. Managers are now permitted to invest in IPOs, primary market debt, and foreign securities. There is also an increased capacity for exchange-traded derivatives, now allowed up to 1.25 times the assets under management, which can be a tool for managing market volatility. Additionally, discretionary portfolio managers can allocate up to 10% of their assets into investment-grade, unlisted non-convertible debt, provided they obtain explicit client consent.
While these changes offer more options, they also introduce new dynamics for investors to monitor. For instance, the increased flexibility in using derivatives and investing in unlisted debt comes with inherent liquidity and market risks. Additionally, while the PRIM route promotes diversification, it relies on the performance of underlying mutual funds or ETFs, meaning investors should still evaluate the manager's ability to select the right funds.
There is also a structural guardrail regarding conflicts of interest: investment in schemes of an asset management company (AMC) belonging to the same group is now capped at 25% of the total assets under management under the PRIM route. This is intended to ensure managers prioritize client interests over group affiliations. As the industry adapts to these regulations, the primary focus for investors will be on how wealth managers differentiate their strategies and service quality under the new fee structures and operational mandates.