The Securities and Exchange Board of India’s (Sebi’s) new mutual fund-focused portfolio management route could open customised wealth management to a wider pool of affluent investors, while giving advisers and portfolio managers a new avenue to expand their businesses, industry experts said.
The Portfolio Managers Route for Investing in Mutual Fund Units (PRIM) allows portfolio managers to build customised portfolios using direct plans of mutual funds, including index funds and exchange-traded funds (ETFs), as well as specialised investment funds (SIFs). With a minimum investment of Rs 25 lakh, PRIM is positioned between conventional mutual funds and portfolio management services (PMS), which require a minimum investment of Rs 50 lakh.
Experts believe the lower entry threshold could bring professionally managed portfolios within reach of a relatively untapped segment of affluent investors, particularly those with investible assets of Rs 25-50 lakh.
A Balasubramanian, MD and CEO of Aditya Birla Sun Life Mutual Fund, said PRIM would give investors who have so far been unable to access customised portfolios another avenue for wealth creation. It could also help registered investment advisers expand their businesses, he said.
Vaibhav Chugh, CEO of Abakkus Mutual Fund, described PRIM as a potential “structural catalyst” for investors. “By enabling fund managers to build customised multi-product portfolios using MFs, ETFs and SIFs, PRIM will help expand the addressable market to emerging HNIs, UHNIs and institutional investors and broaden retail access, ultimately driving the relevance of asset allocation under one umbrella,” he said.
The initial flows into PRIM are expected to come largely from investors in the Rs 25-50 lakh bracket who were previously below the threshold for conventional PMS.
Aditya Agarwal, co-founder of Wealthy.in, expects some existing mutual fund investors to shift their assets into professionally managed portfolios, while affluent investors looking for mutual fund-based wealth management solutions could also enter the segment.
Diversified equity, hybrid and ETF/index strategies are likely to find favour under PRIM, while SIFs could become an important component of such portfolios. Portfolio managers can determine SIF allocations based on investors’ risk profiles as well as valuations, diversification, liquidity and expected returns, Agarwal said.
The framework could also make investors more likely to stay invested during periods of market volatility.
Sandeep Jethwani, co-founder of Dezerv, said discretionary portfolio managers can rebalance portfolios during market drawdowns, helping individual investors remain invested rather than exiting in panic. This could make assets under management stickier and support growth through both fresh inflows and better client retention.
A better managed investment experience could also accelerate the financialisation of household savings and give investors access to relatively complex products such as SIFs through professional managers, he said.
Shobhit Mathur, co-founder of Ionic Wealth, said PRIM could allow portfolio managers to build more comprehensive portfolios for Indian families, including global and credit exposure, under a single regulated relationship.
Sebi has capped fixed management fees under PRIM at 1%, while allowing portfolio managers to levy performance-linked fees. Mathur said the key test would ultimately be the returns delivered after accounting for all costs and taxes.
That would make it critical for managers to match each asset class to a client’s risk profile and maintain transparency on the total cost of investing, he said, adding that greater clarity is awaited in the final regulations on allocation and other operational aspects.