SEBI has released the Portfolio Managers Regulations, 2026, allowing portfolio managers to invest in IPOs, foreign securities, and primary debt. The move introduces a new, lower-ticket investment route called PRIM, requiring a minimum of ₹25 lakh for mutual fund and ETF investments.
The Securities and Exchange Board of India has introduced the Portfolio Managers Regulations, 2026, marking a major update to the framework governing how portfolio management services operate. This change aims to provide more flexibility to managers while maintaining oversight. With these new rules, portfolio managers can now include IPOs and primary debt issuances in their investment portfolios. Discretionary portfolio managers may allocate up to 10% of assets into investment-grade, unlisted, non-convertible debt, provided they have clear consent from their clients. Additionally, the regulator has set a new limit for derivative exposure, allowing managers to use derivatives up to 1.25 times the client’s assets under management.
New Investment Route and Risk Management
One of the notable changes is the introduction of the Portfolio Managers Route for Investing in Mutual Fund Units, known as PRIM. This feature allows investors to access mutual funds and ETFs through their portfolio managers with a minimum ticket size of ₹25 lakh. To ensure safety and prevent conflicts of interest, SEBI has implemented a 25% prudential cap on investments made in schemes managed by associated asset management companies. Portfolio managers utilizing this route must maintain a net worth of at least ₹2 crore. While this provides a new way for investors to diversify their portfolios, it also requires them to carefully evaluate the manager's strategy and the increased complexity associated with these investment options.
Managers can also diversify portfolios through international exposure, such as foreign equity and debt, though these activities remain strictly under the guidelines of the Reserve Bank of India’s Liberalised Remittance Scheme. The regulations also allow for Independent Fund Managers to operate under the umbrella of a registered portfolio manager. To protect investor interests, the regulator has clarified that the primary registrant remains fully liable for all actions taken by these independent managers. Furthermore, these managers must meet specific academic and professional certification requirements.
To ensure transparency for investors, the new rules mandate a rigid separation between distribution activities and PRIM operations. This is designed to reduce the risk of conflicts where a manager might recommend a product to earn a commission rather than for its investment merit. For investors, these changes mean access to a broader range of assets, including international stocks and primary market opportunities. However, the use of derivatives and foreign investments adds layers of risk that were previously less accessible in standard portfolios. Investors may want to monitor how their portfolio managers adapt their strategies and ensure that the increased scope aligns with their own risk appetite and financial goals. The next steps will involve existing portfolio management firms updating their operations to comply with these fresh guidelines.