SEBI has launched the Portfolio Managers’ Route for Investing in Mutual Fund Units (PRIM), lowering the minimum investment for professional portfolio management to ₹25 lakh. This framework allows investment managers to build customized portfolios using direct mutual fund plans and derivatives, effectively bridging the gap between standard financial advisory services and traditional portfolio management.
The Securities and Exchange Board of India (SEBI) has introduced a new framework called the Portfolio Managers’ Route for Investing in Mutual Fund Units (PRIM). This move significantly lowers the entry barrier for professional portfolio management, allowing investors to access these services with a minimum investment of ₹25 lakh, half the previous ₹50 lakh requirement for standard Portfolio Management Services (PMS). This initiative is designed to formalize the role of investment professionals, shifting them from simple product distributors or advisers to active portfolio managers with fiduciary accountability.
Expanding Investment Options and Risk Control
Under this new structure, portfolio managers are permitted to build customized investment strategies using direct plans of mutual funds, index funds, exchange-traded funds (ETFs), and Specialised Investment Funds. A significant change is the ability to use exchange-traded derivatives up to 1.25 times the client’s total assets. This provides a formal mechanism for managers to hedge or protect portfolios against market volatility—a tool that was previously difficult for individual investors to access for smaller ticket sizes.
Governance and Fee Regulation
To protect the interests of investors, SEBI has implemented clear guardrails. Fixed management fees are capped at 1 per cent of the assets under management. While performance-based fees remain allowed, the fixed fee cap prevents excessive charging. Additionally, to reduce conflicts of interest where a manager might push their own company's products, exposure to schemes linked to affiliated or associate asset management companies is capped at 25 per cent. Firms choosing to register under this PRIM-only route must maintain a minimum net worth of ₹2 crore, ensuring that only established or well-capitalized entities can offer these services.
Shift from Advisory to Fiduciary
This framework marks a structural change in how wealth management is conducted in India. Previously, many financial advisers operated on a commission-based model. By registering as portfolio managers under the PRIM route, these professionals are now required to act as dedicated asset allocators. This implies a higher level of responsibility, where the manager is legally accountable for the portfolio's construction, rebalancing, and risk management rather than just recommending schemes. For investors, this shift offers a move toward more transparent, fee-based advice rather than product-driven sales.
Investor Monitorables
Investors looking to utilize this route should monitor how wealth management firms adapt their business models to the 1 per cent fee cap. While the lower entry threshold is beneficial, the success of these customized portfolios will depend on the manager's ability to generate value after factoring in these fees and the costs of active rebalancing. The effectiveness of the hedging strategies using derivatives will also be a key indicator of the manager's skill in navigating market ups and downs.