Hawk-I Insights | Investment & Regulatory Updates | 20 October 2026
Introduction: A Major Overhaul of India's PMS Framework
India's Portfolio Management Services (PMS) industry is entering a new regulatory phase.
The Securities and Exchange Board of India (SEBI) has notified the SEBI (Portfolio Managers) Regulations, 2026, which will come into effect on 1 April 2027, replacing the existing 2020 regulations.
The reforms aim to modernise portfolio management, simplify regulatory compliance, widen permissible investment opportunities and strengthen investor protection.
For investors, the changes are particularly interesting because they introduce a new route for professionally managed mutual fund portfolios, provide additional flexibility for accredited investors and revise how portfolio managers operate.
But does this mean PMS is becoming available to everyone? Will investors automatically receive better returns? And should existing PMS investors change their portfolios?
Let's examine what the regulations actually mean.
1. What Is Portfolio Management Services (PMS)?
Portfolio Management Services involve professional management of an investor's securities or funds under an agreed investment mandate.
Unlike a conventional mutual fund, where investors own units in a pooled scheme, PMS typically involves individually managed client portfolios.
Depending on the arrangement, portfolio management may be discretionary, non-discretionary or advisory.
Discretionary PMS
The portfolio manager makes investment decisions within the agreed mandate without seeking approval for each transaction.
Non-discretionary PMS
The portfolio manager makes recommendations, while investment decisions require the client's approval.
Advisory PMS
The manager provides investment advice rather than exercising discretionary control over the portfolio.
PMS can provide greater customisation, but it also involves investment risks, fees, taxation considerations and potentially concentrated holdings.
Important: PMS does not guarantee higher returns than mutual funds or market benchmarks.
2. Why Has SEBI Introduced New Regulations?
SEBI initiated a comprehensive review of the 2020 regulations against the backdrop of substantial industry growth and increasing investor sophistication.
According to figures discussed during the regulatory review, PMS industry assets increased from approximately ₹18.07 lakh crore in April 2019 to ₹42.61 lakh crore in May 2026.
These industry figures should not be confused with assets held exclusively by individual discretionary PMS investors.
As the industry grows, regulations need to address more diverse investment strategies, technology-enabled services, operational risks and evolving customer expectations.
The new framework seeks to:
Simplify regulatory requirements.
Introduce more flexible operating models.
Expand eligible investment avenues.
Improve investor disclosures.
Strengthen governance and accountability.
Accommodate different types of portfolio management services.
3. The Biggest Development: A New ₹25 Lakh Portfolio Management Route
One of the most noteworthy changes is the introduction of PRIM — Portfolio Management Service Route for Investment in Mutual Fund Units.
This creates a distinct route for portfolio managers that manage investments through eligible mutual fund products rather than constructing conventional direct-security PMS portfolios.
How does PRIM work?
Under the notified framework, PRIM is subject to specific conditions, including:
A minimum client investment of ₹25 lakh.
A portfolio manager net-worth requirement of ₹2 crore.
Investments through eligible direct plans of Indian mutual funds including index funds, ETFs and Specialised Investment Funds.
Separate operational and qualification requirements.
Why is this important?
Traditional PMS generally requires a minimum investment of ₹50 lakh.
PRIM introduces a lower entry threshold for a particular form of professionally managed portfolio service.
Consider an investor with ₹30 lakh who wants professional oversight of an allocation across equity, debt and other eligible fund categories.
Rather than selecting and monitoring every fund independently, the investor may be able to use an eligible PRIM service once such offerings become operational.
However, PRIM is not equivalent to a conventional direct-stock PMS portfolio.
Its investment universe, underlying expenses, management fees and portfolio structure differ.
Does PRIM mean a ₹25 lakh investment is required for every mutual fund portfolio?
No.
Investors can continue investing directly in ordinary mutual fund schemes under the applicable minimum investment requirements of those schemes.
The ₹25 lakh threshold relates to this specific portfolio management service route.
Will PRIM deliver higher returns?
Not necessarily.
Professional oversight may help with asset allocation, monitoring and rebalancing, but it cannot eliminate market risk.
The additional service fee must also be justified by the value delivered.
Investor takeaway: PRIM creates another investment-management option, not an automatic upgrade over investing directly in mutual funds.
4. Traditional PMS Minimum Investment Remains ₹50 Lakh
For conventional PMS, the minimum investment requirement of ₹50 lakh per client has been retained, subject to specified exceptions.
The regulations provide separate treatment for eligible accredited investors.
This distinction matters because the introduction of PRIM does not reduce the conventional PMS threshold to ₹25 lakh.
| Service | Minimum investment |
|---|---|
| Conventional PMS | ₹50 lakh |
| PRIM | ₹25 lakh |
| Ordinary mutual funds | Scheme-specific minimums |
| SIF | Generally ₹10 lakh aggregate minimum, subject to applicable exceptions |
These are different investment structures with different regulatory requirements.
An investor should not choose one solely because its minimum investment is lower.
5. New Flexibility for Accredited Investors
The regulations provide additional flexibility for investors who meet the applicable accredited-investor criteria.
An accredited investor is an investor whose financial eligibility has been verified under the relevant regulatory framework.
Accreditation should not be confused with simply declaring oneself wealthy or experienced.
The 2026 PMS regulations introduce provisions relating to simplified agreements for certain large accredited-investor commitments and greater flexibility in permissible investments.
For example, the framework provides for simplified agreement treatment where the specified accredited-investor commitment is at least ₹10 crore.
It also allows eligible accredited-investor arrangements greater flexibility in unlisted securities, subject to the relevant conditions.
Why does this matter?
Sophisticated investors may require investment strategies that extend beyond traditional listed equities.
However, additional flexibility can introduce:
Lower liquidity.
More complex valuation.
Greater concentration risk.
Longer investment horizons.
Higher operational and counterparty risks.
Investor takeaway: Greater investment flexibility is useful only when it aligns with an investor's liquidity needs, risk tolerance and overall financial position.
6. Expanded Investment Opportunities for Portfolio Managers
The new regulations broaden the scope of eligible investments, subject to applicable restrictions and SEBI-specified limits.
These include provisions concerning:
Securities offered through initial public offerings.
Eligible primary-market debt securities.
Specified foreign securities.
Certain unlisted securities.
Exchange-traded derivatives.
What could this mean for investors?
Portfolio managers may have more instruments available to implement their strategies.
For example, overseas securities could provide additional geographical exposure where permitted.
Primary-market opportunities could broaden the investment universe.
Derivatives may be used within the applicable regulatory limits and investment mandates.
However, a wider investment universe does not automatically improve portfolio quality.
More investment choices can also create greater complexity.
Questions investors should ask
Which instruments can the manager actually use?
What percentage of the portfolio may be allocated to them?
Are derivatives used for hedging or to create additional exposure?
What liquidity restrictions apply?
How are the associated risks disclosed?
Investor takeaway: Focus on the investment strategy and risk controls rather than the number of instruments available.
7. Stronger Financial Requirements for Portfolio Managers
The new framework retains a minimum net-worth requirement of ₹5 crore for ordinary portfolio managers.
It also introduces a liquidity requirement under which at least 10% of the prescribed net worth must be maintained in eligible unencumbered liquid assets.
For a manager maintaining exactly ₹5 crore of qualifying net worth, that corresponds to ₹50 lakh in eligible liquid assets.
PRIM has a separate ₹2 crore net-worth framework, together with its applicable liquidity requirements.
Why is this relevant to customers?
Financial resources are important because portfolio management businesses need the capacity to support technology, risk management, compliance, personnel and ongoing operations.
However, a portfolio manager's net worth is not a guarantee of investment performance or protection against market losses.
Investor takeaway: Regulatory capital is one indicator of operational capacity, not a substitute for evaluating investment quality.
8. Changes in Investor Agreements and Disclosure Documents
The 2026 regulations update the requirements for client agreements and disclosure documents.
The framework places greater emphasis on digital availability and timely updates.
Reported provisions include:
Digital access to the disclosure document.
Physical copies on request.
Annual disclosure updates within the prescribed timeline.
Addenda following material changes.
Incorporating specified authorisations into the client agreement.
Why is the disclosure document important?
Before investing, the disclosure document helps investors understand:
The portfolio manager's background.
Investment strategies.
Relevant risks.
Fees and expenses.
Conflicts of interest.
Performance disclosures.
Material operational arrangements.
A portfolio manager's disclosure document is not an assurance of future investment performance.
What should investors do?
Read the disclosure document alongside the client agreement, not as a replacement for it.
Pay particular attention to fee calculations, withdrawal provisions, investment restrictions and risk disclosures.
9. Understanding PMS Fees: The Cost Can Affect Your Returns
PMS fee structures can be more complex than those of ordinary mutual funds.
Depending on the provider and strategy, costs may include:
Fixed management fees.
Performance-linked fees.
Brokerage and transaction charges.
Custody and related service charges.
Applicable taxes and other disclosed expenses.
Illustrative example
Assume an investor places ₹50 lakh into a PMS strategy.
If the annual management fee is 2%, the simple annual fee illustration is ₹1 lakh before taxes and other charges.
If a strategy earns a gross return of 12%, that does not mean the investor necessarily receives 12% after expenses.
The actual net return depends on the fee structure, timing of charges, portfolio transactions and other applicable costs.
Performance-linked arrangements can be particularly important to understand.
Ask these questions before signing
Is the fee charged on invested capital or portfolio value?
Is there a performance fee?
How does the hurdle rate work?
Is a high-water mark applicable?
Are transaction costs additional?
Are there exit-related charges?
How is net performance calculated and reported?
Investor takeaway: Compare investment strategies using relevant risk-adjusted, post-fee outcomes rather than headline gross returns alone.
10. Will PMS Portfolios Become Easier to Transfer?
SEBI's regulatory review also addresses the operational difficulties investors may face when changing portfolio managers or custodians.
The review discussed facilitating portability of demat holdings without unnecessary account restructuring.
However, the detailed implementation depends on operational arrangements involving depositories, custodians and portfolio managers.
Investors should not assume that seamless transfers are already available merely because the regulatory framework has been updated.
Before changing a portfolio manager, ask about securities transfers, transaction charges, tax implications and any contractual termination conditions.
11. What Happens to Existing PMS Investors?
The regulations come into effect on 1 April 2027.
They also provide transition arrangements for certain existing portfolio managers and client situations.
For example, the framework contains provisions relating to existing accounts below the prescribed minimum investment threshold and transitional compliance with specified investment restrictions.
Should existing investors exit their PMS?
Not solely because the regulations are changing.
Investors should first review:
Their portfolio's suitability.
The manager's investment approach.
Performance against an appropriate benchmark.
Portfolio concentration.
Liquidity needs.
Total costs.
The revised agreement or disclosure document, where applicable.
Any portfolio changes should be based on financial objectives and actual investment considerations, not regulatory headlines alone.
12. PMS vs PRIM vs Mutual Funds vs SIF
With the introduction of PRIM, investors will have more investment-management structures to compare.
| Feature | Conventional PMS | PRIM | Mutual Funds | SIF |
|---|---|---|---|---|
| Primary structure | Individually managed portfolio | Managed eligible fund portfolio | Pooled fund scheme | Pooled specialised strategies |
| Typical minimum | ₹50 lakh | ₹25 lakh | Scheme-specific | Generally ₹10 lakh |
| Investment approach | Mandate-based | Eligible fund investments | Scheme-based | Strategy-based |
| Customisation | Potentially high | Service-dependent | Generally limited | Scheme-based |
| Costs | PMS fees and expenses | Service fees plus underlying fund costs | Scheme expenses | Scheme expenses |
| Risk | Strategy-dependent | Underlying allocation-dependent | Scheme-dependent | Strategy-dependent |
The products are not interchangeable.
A conventional PMS investor may seek individually managed securities.
A PRIM investor may prefer professional oversight of a portfolio of eligible funds.
A mutual fund investor may prefer simpler direct access to diversified schemes.
An SIF investor may seek a specialised investment strategy and accept its particular risks.
Which is best?
There is no universally superior option.
The appropriate structure depends on:
Investment amount.
Financial goals.
Risk tolerance.
Investment horizon.
Liquidity requirements.
Desired customisation.
Total expenses.
Existing portfolio composition.
The right question is not which product is more sophisticated, but which structure best serves the investor's objectives.
13. What These Reforms Do Not Mean
Several misconceptions are worth addressing.
Myth 1: PMS minimum investment has been reduced to ₹25 lakh.
Not for conventional PMS. The ₹25 lakh threshold relates to the new PRIM route.
Myth 2: Every mutual fund investor now needs a portfolio manager.
No. Investors can continue investing in mutual funds directly or through applicable distribution arrangements.
Myth 3: More investment flexibility guarantees higher returns.
No. Additional flexibility can increase risk as well as opportunity.
Myth 4: A SEBI-registered portfolio manager offers guaranteed returns.
No. SEBI registration does not guarantee performance or eliminate investment risk.
Myth 5: The new regulations are already operational.
No. Their notified effective date is 1 April 2027.
14. Seven Questions Every PMS Investor Should Ask
Before investing in or continuing with a PMS, consider these seven questions.
Suitability: Why is this strategy appropriate for my financial objectives?
Portfolio construction: How concentrated is the portfolio, and what drives its risk?
Performance: How has the strategy performed against a relevant benchmark after fees?
Costs: What are the complete management, performance and transaction-related expenses?
Liquidity: How and when can I withdraw my investment?
Taxation: How could portfolio transactions affect my tax liability?
Governance: What are the manager's risk controls, disclosures and grievance procedures?
A professional investment decision should begin with these questions—not past-return rankings.
15. Hawk-I Investment's Perspective
The SEBI Portfolio Managers Regulations, 2026 represent an important evolution in India's investment-management ecosystem.
Three developments stand out.
First, greater choice: The PRIM framework introduces an additional professional portfolio-management route.
Second, greater flexibility: The regulations expand the investment tools potentially available to eligible portfolio managers and sophisticated investors.
Third, greater responsibility: More complex investment choices make due diligence, transparency and suitability even more important.
At Hawk-I Investment, we believe that successful long-term investing begins with understanding the investor—not selecting the most fashionable investment product.
A well-constructed investment portfolio should reflect financial goals, risk capacity, time horizon, liquidity needs and existing investments.
Regulatory innovation can create opportunities, but disciplined investment selection remains essential.
Research. Compare. Recommend. Protect.
Need Help Understanding Your Investment Options?
Whether you are evaluating mutual funds, Portfolio Management Services or Specialised Investment Funds, understanding the differences is an important first step.
Explore investment information and connect with the Hawk-I team at www.hawksarthi.com.
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Sources and Disclaimer
Primary regulatory source: Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, published 12 October 2026, effective 1 April 2027.
Background source: SEBI Consultation Paper on Comprehensive Review of SEBI (Portfolio Managers) Regulations, 2020, dated 23 July 2026.
This article is intended for general education and does not constitute personalised investment advice, a recommendation of any particular PMS or other investment product, or an assurance of returns.
All investments carry risks. PMS, PRIM, mutual funds and SIFs have different investment structures, costs, risks and regulatory requirements. Investors should review the applicable offering documents and seek suitable professional guidance before investing.
Certain implementation details may be clarified through subsequent SEBI circulars and operational guidelines.Start writing here...