Portfolio management services (PMS) and alternative investment funds (AIFs) have expressed interest with the capital market regulator Sebi to venture into mutual funds after it announced the regulatory framework for specialised investment funds (SIFs) in February this year.
Unlike PMS and AIFs, which cater to wealthy individuals with minimum investment thresholds of ₹50 lakh and ₹1 crore, respectively, SIFs lower the bar to ₹10 lakh, drawing in the mass affluent investors who may be seeking more than just traditional mutual fund products. These funds are expected to offer more diverse investment strategies with asset allocation across equities, fixed income and exchange-traded or over-the-counter derivatives.
Sebi, however, has only allowed mutual funds to offer SIFs, which has prompted PMS and AIFs to seek out mutual fund licenses. The applications of at least five firms - AlphaGrep Securities, Monarch Networth Capital, Marcellus Investment Managers, Wealth First Portfolio Managers and Nuvama Wealth Management were under process for in-principle approval as of March 31, 2025, as per disclosure on Sebi’s website.
“Since we have announced the norms for registration, we have got several PMS players who have approached us for a license for mutual fund and similarly many brokers have also approached us for a license for mutual fund. We have accorded certain in-principle approvals to certain PMS also. We will need well-governed players in this ecosystem,” said Sebi executive director Manoj Kumar at an Indian Chamber of Commerce organised event on Saturday.
As of March 31, 2025, there we 46 mutual funds operating in India as per data available with the industry body Amfi.
Kumar, however, said that the regulator allowing more mutual funds to operate should not be seen as a move to destablise the existing players. “The number of approvals in the mutual fund space is increasing day by day and we want more competition. It is not to destabilise the established players. The idea is to enhance the reach of the industry and expand competition,” Kumar said.
On allowing only mutual funds to offer SIFs, Kumar said that mutual funds operate under more stringent governance standards as they deal with retail investments.
Expanding horizons
The mutual fund industry might be allowed to venture into various businesses such as advisory services, including that of non-mutual fund products, which are currently out of bounds for the industry, as per section 24(b) of Sebi’s mutual fund regulations.
Kumar said that the mutual fund industry including funds managers have developed core competence that needs to be leveraged not just for mutual funds but also other securities market products, prompting the need for the regulator to consider opening up the sector “without diluting regulatory core focus”.
“A formal consultation paper in this regard will be launched very shortly,” he said.