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MUMBAI: Portfolio management services (PMS) firms have asked the market regulator to widen their investment universe, as the segment struggles to keep pace with rival products, four people aware of the discussions said.
Key demands include allowing investments in unlisted markets and permission to participate as anchor investors in initial public offerings (IPO), both currently restricted for PMS structures.
Currently, only non-discretionary PMS allows up to 25% allocation to unlisted securities, such as alternative investment fund units, real estate investment trusts and infrastructure investment trusts. Discretionary PMS, which accounts for 92% of total PMS assets as of February, is not allowed to invest in unlisted securities.
The push comes as PMS growth trails mutual funds and alternative investment funds (AIFs), with industry executives pointing to tighter investment rules, operational constraints and tax friction as factors hurting competitiveness in India’s asset management market.
“Sebi (Securities and Exchange Board of India) is keen on growing this segment and making PMS a platform for wealth management. To do so, they are looking at increasing accessibility and to broaden the number of securities PMS firms can invest in,” said one of the executives mentioned above.
The proposals coincide with a broader review of PMS regulations by the market regulator. Mint reported in February that Sebi is planning to issue a consultation paper to revise the six-year-old framework before its June board meeting, marking the first comprehensive overhaul of the rules.
The regulator has sought feedback from industry participants in recent months, which is expected to be considered during the revamp, as current investment restrictions put PMS firms at a “handicap,” another executive mentioned above.
Emailed queries to Sebi and Association of Portfolio Managers in India (Apmi) sent earlier today did not elicit a response till press time.
PMS assets under management (AUM) have lagged other asset classes. Assets grew 14.4% year-on-year to ₹11.7 trillion as of January, according to Apmi. The AUM excludes assets from the Employees' Provident Fund Organization.
In contrast, mutual fund AUM rose 21% to ₹81.01 trillion over the same period, according to the Association of Mutual Funds in India (Amfi).
Client growth shows a similar divergence. PMS accounts rose only about 7% between June 2025 and February 2026 to an estimated 217,000, while mutual fund folios grew 12% to 271 million. India currently has 493 PMS firms, according to Apmi.
In practice, PMS flexibility remains constrained investments in unlisted securities are not allowed. In contrast, AIFs have significantly greater scope to invest in such assets.
“One way anchor allocations for PMS could be allowed is by classifying PMS as Qualified Institutional Buyers. Now, NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services (India) Ltd) allow differentiation between PMS demat accounts and individual accounts. So, there could be a case for considering these PMS demat accounts as QIBs (qualified institutional buyers)," said another PMS executive on the condition of anonymity.
In PMS, portfolio managers handle an individual’s portfolio in line with their financial goals. Unlike mutual funds, which pool money from multiple investors into a common fund, PMS ensures investments are held directly in the investor’s own name. PMS requires a minimum investment of ₹50 lakh, according to Sebi.
The tax framework adds to the friction. Investors must report every transaction individually, making high-churn strategies less attractive. In contrast, AIFs handle taxation at the fund level, with returns delivered net of tax, easing the compliance burden for investors, according to industry experts.
Mint reported in May last year that alternative investment funds (AIFs) have significantly outpaced PMS in growth, highlighting a widening divergence between the two wealth-focused asset classes.
Industry participants are also pushing to extend flexibility to other areas.
“Currently, registered investment advisors (RIA) can advise clients on unlisted securities. A PMS manager, despite having stricter qualifications and regulatory oversight, cannot advise or invest in unlisted securities,” said another PMS executive on the condition of anonymity.
Data suggests a growing appetite for unlisted securities. AUM in unlisted equity among PMS firms grew 26.3% as of February in fiscal 2026, according to Apmi. In the same period, listed equity AUM grew only 5%.
"Any added flexibility in terms of product additions is beneficial for PMS. However, the key question is whether it translates into better returns. If these changes enable improved returns, they would positively impact the attractiveness of PMS products. Otherwise, flexibility alone does not add much value,” said Rajkumar Singhal, managing director and chief executive officer at Quest Investment Managers, a PMS firm.
Several other suggestions may also be considered as part of the regulatory review.
“There are other things planned such as easing onboarding. Client onboarding happens with a click in mutual funds but that’s not the case for a PMS. Similarly, AIFs can also do a lot more than PMS. These suggestions have been given to avail similar opportunities for PMS to compete in the market,” said the first executive mentioned above.
Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the belief that everything in this world can be explained in simple and fewer words, and that idea shapes how she approaches her writing. She aims to cut through complexity and present nuanced regulatory and financial developments in a way that is both accessible and meaningful to readers.<br><br>When she is not tracking market chatter, Apoorva can usually be found deep into a fiction novel or out on a long run. She is also a trained classical dancer in Bharatanatyam, Mohiniyattam, and Kathakali.
Srushti is a markets reporter at Mint. She writes on equity markets, and her areas of coverage range from brokers and exchanges to mutual funds and the fast-evolving alternatives space, including GIFT City, from the financial capital of India. She has an experience of over three years in journalism, and has previously worked at Moneycontrol. She has an undergraduate degree in mass communication and a postgraduate diploma in business and financial journalism from Asian College of Journalism, Chennai.<br><br>Srushti prefers meeting people from the industry over making calls. Her work aims to drive impact—her story on illegal gold imports, for instance, caught the government’s attention and contributed to a policy shift. She specialises in turning complex market data into clear, engaging stories so even her grandmother could understand futures and options.<br><br>Outside of the newsroom, she enjoys spending money on jewellery and watching thriller films—especially the kind that keep her awake at night. She spends 1.5 hours a day commuting in Mumbai locals, listening to horror podcasts on her way to work. She’s also very talkative—so reach out only if you have lots of time.