SEBI Approves Portfolio Managers’ Route to Invest in Mutual Funds with Rs 25 Lakh Minimum

The Securities and Exchange Board of India (SEBI) has given the green light to a new investment avenue called the Portfolio Managers’ Route for Investing in Mutual Fund Units (PRIM). This regulatory change allows portfolio management services (PMS) players to deploy clients’ funds into direct plans of mutual fund schemes, including exchange-traded funds (ETFs), index funds, and specialised investment funds (SIFs). The minimum investment size for this option is set at Rs 25 lakh.

Under this framework, existing portfolio managers can introduce PRIM as a distinct investment strategy. This expands their ability to manage portfolios beyond traditional direct equity investments or other conventional PMS approaches. By incorporating mutual funds and SIFs, portfolio managers gain fresh tools to build diversified, professionally managed portfolios.

The move comes amid a widening universe of mutual fund products available to investors. While fund availability has improved, challenges related to asset allocation, portfolio construction, and regular rebalancing persist. Investors often struggle with these aspects, which can impact overall returns and risk management.

Vikas Khemani, Chairman of the Association of Portfolio Managers in India (APMI), hailed SEBI’s decision as a major advancement for the PMS industry. He emphasized that enabling portfolio managers to craft strategies based on mutual funds and SIFs at a Rs 25 lakh minimum ticket broadens access to expert portfolio management while maintaining regulatory oversight. Khemani mentioned the industry views this as an opportunity to foster innovation, governance, and transparency.

The PRIM route grants PMS players access to direct mutual fund plans from Indian asset management companies across categories like ETFs, index funds, and specialised funds. This means portfolio managers can rely less on picking individual stocks and more on curated fund selections to meet client objectives.

Sandeep Jethwani, Co-founder of Dezerv, highlighted that PRIM’s significance lies beyond simply enabling another way to invest in mutual funds. He explained that investors no longer face barriers in accessing mutual funds, but rather in effectively choosing which funds to hold, determining appropriate allocations, timing rebalancing, and maintaining discipline through various market cycles.

Drawing on Dezerv’s analysis of over 800,000 portfolio reviews, Jethwani pointed out that more than half of investor portfolios underperform their benchmarks. This underperformance often stems from behavioural biases and portfolio construction issues such as chasing past fund performance, overlapping fund holdings, poor allocation, and difficulty staying invested during volatility.

PRIM addresses these challenges by placing responsibility for fund selection, allocation, and rebalancing with regulated portfolio managers. This shift establishes clear accountability for navigating market movements and optimizing portfolio health over time.

Importantly, the regulatory approval of PRIM also recognizes PMS models that primarily invest through mutual funds rather than direct equity stocks. Jethwani noted that Dezerv introduced a mutual-fund-only PMS product in 2022, diverging from the traditional stock-heavy PMS approach. The company believes that professional management can help investors maximize the benefits of mutual funds throughout market cycles.

SEBI’s formal endorsement of this model through PRIM is viewed as a significant validation of mutual-fund-centric portfolio management strategies. Dezerv currently manages Rs 8,674 crore under its flagship mutual fund-only PMS products, which have a four-year live track record.

This development is part of SEBI’s broader effort to enhance investment options and regulatory clarity in the portfolio management sector. It aligns with ongoing trends toward diversification, client protection, and innovation in asset management.

By offering a structured route for PMS players to include mutual funds and SIFs in their strategies, SEBI is facilitating greater investor access to professionally curated portfolios while promoting transparency and accountability in the management process.