India’s affluent investors now have options beyond mutual funds. While Specialised Investment Funds have existed for a while, the market regulator is now redefining Portfolio Management Services. Before taking the plunge, there are a few key questions they need to ask, write V Shunmugam and Dewang Supekar.
l What do SIF and PMS offer beyond mutual funds?
A mutual fund (MF) manages a long-only portfolio for lakhs of investors. It operates under strict limits on what it can buy. Specialised Investment Funds (SIFs) and Portfolio Management Services (PMS) sit a step above. They give the manager more freedom and the investor more choice.
A SIF is managed by an asset management company under a distinct brand and requires a minimum investment of Rs 10 lakh. It can take short positions via derivatives, up to 25% of net assets, enabling long-short strategies that are not possible with regular mutual funds.
The growth rate has been remarkable, with SIF assets increasing from approximately Rs 891 crore in October 2025 to Rs 26,447 crore by August 2026. Meanwhile, investor participation surged from 10,212 to nearly 1.26 lakh within the same timeframe, clearly indicating the industry’s swift development.
A PMS requires a minimum of Rs 50 lakh. The portfolio is held in the investor’s name. It can be tailored to his needs. Each investor holds a separate portfolio, not a unit in a common pool.
l What are the recent changes to the PMS framework?
THE SECURITIES AND Exchange Board of India’s (Sebi) board convened on September 24, 2026 and approved the Portfolio Managers Regulations, 2026, replacing the 2020 guidelines. The objective is to expand the industry and simplify compliance.
Portfolio managers now have the option to invest in initial public offerings (IPO) and primary debt issues. They can also access foreign securities. A new route, called PRIM (Portfolio Managers Route for Investing in Mutual Fund units), allows them to buy direct plans of mutual funds, ETFs (exchange-traded funds), index funds, and SIFs and will require a minimum of `25 lakh to start.
The rulebook has been shortened from 70 pages to 33. The final notified version will specify the start date and detailed terms.
l Are there any guardrails?
IN A SIF, unhedged short exposure is restricted to 25% of net assets. Only fund houses meeting Sebi’s track record standards are permitted to launch one.
In a PMS, investment in exchange-traded derivatives is permitted up to 1.25 times the client’s assets under management (AUM). Unlisted debt must be of investment grade and needs client approval. The Rs 50 lakh minimum investment acts as a safeguard, ensuring these products are kept with investors capable of handling the risk.
l Can it invest in unlisted securities?
IN A DISCRETIONARY PMS, clients can now authorise up to 10% of AUM to be invested in non-convertible, unlisted, investment-grade debt against the limit of 25% for non-discretionary PMS. IPO shares are listed shortly after allotment and are valued at the current market price. Unlisted debt is valued according to the manager’s valuation policy, which is shared with the client. Investors should ask for this policy prior to signing, and also ask how frequently the value is updated.
l What value does the manager add?
EVERY PMS HAS to report returns after deducting all fees and expenses. The returns are compared to a benchmark from a standard list. The Association of Portfolio Managers in India publishes such figures for all managers. Investors should compare the returns across years and assess how much of the gain is due to the strategy versus a rising market. For an SIF, the fund company publishes returns compared to a benchmark, similar to a mutual fund.
l How do the costs compare?
THERE ARE TWO cost layers: the fund’s expense ratio and the PMS fee. Under PRIM, the manager invests in direct plans. So the first cost layer is lower than in regular plans. A performance fee may also be charged. The fixed management fee is capped at 1% of the AUM and operating expenses are limited to 0.5% annually. Statutory levies are excluded from this cap. Investors should ask the manager for the total yearly cost, in rupees, covering both fees.
l How quickly can one exit investments?
IN A PMS, the securities are registered in the investor’s name. The investor can transfer them to his demat account or request the manager to sell them. The exit load is limited to 3% in the first year, 2% in the second, 1% in the third, and is nil thereafter. However, for the PRIM, Sebi’s framework proposes waiving the exit load provisions.
An SIF determines its own redemption frequency. Some allow daily withdrawals, while others operate at specific intervals with a notice period. The interval units are listed on the exchange, enabling sales there.
Shunmugam is partner while Supekar is associate consultant at MCQube