The hike in minimum investment in PMS funds may slow down the growth seen by the PMS industry, experts said.
"The increase in investment limit and networth criteria are likely to slow down the growth seen by the PMS industry since the market of potential investors will reduce with the doubling of the minimum investment amount to Rs 50 lakh," said Anish Teli, founder of IndexAlpha.
"The increase in net-worth requirements to Rs 5 crores will also limit the number of new and existing businesses that want to obtain or retain the SEBI PMS registration. For retail investors who can’t go for structured products or PMS, readymade portfolios that are professionally managed are a very effective option to take exposure to high-quality strategies at reasonable costs," said Teli.
Market regulator Securities and Exchange Board of India (SEBI) on November 20 doubled the minimum investment in PMS funds to Rs 50 lakh. SEBI also enhanced the net worth requirement of portfolio managers to Rs 5 crore from Rs 2 crore.
Existing investments will be allowed to continue until the end of the PMS agreement, the regulator said in a release detailing decisions taken at its board meet on November 20.
In the release, SEBI said, non-discretionary Advisory Portfolio Managers will not be allowed to invest more than 25 percent of their assets under management (AUM) in unlisted securities.
Dr. VK Vijaykumar, Chief Investment Strategist at Geojit Financial Services said hiking the investment limit for PMS from Rs 25 lakhs to Rs 50 lakhs is a bit restrictive. In his views, many potential investors are likely to be denied the benefits of PMS.
However, some analysts point out that SEBI's directive will bring some sort of stability in the PMS industry.
"We welcome SEBI's proposals, as they will immensely help both the asset management industry as well as investors. The ticket size increase should result in additional AUM from first-time investors, as we expect very few investors to not consider PMS funds due to the limit enhancement," said Sushant Bhansali, CEO, Ambit Asset Management.
"Investment avenues such as mutual funds and advisory platforms continue to be available for the Rs 25 to 50 lakh bracket investors. The net worth increase might reduce the turnover from fund management teams to start their own ventures, thereby enhancing stability for investors and investment managers," said Bhansali.
Vasanth Kamath, CEO & co-founder, Smallcase Technologies, sees this directive from a different angle.
"The PMS or AMC licenses are only two of many ways that SEBI allows investment professionals to showcase their research and create investable products. The other two common ones are Research Analysts (RAs) and Registered Investment Advisors (RIAs). These licenses have a lower net-worth requirement and other setup costs, and as such this directive will encourage even more investment professionals to apply for the RIA or RA license and create readymade portfolios with investor discretion for their clients," Kamath said.
Prakarsh Gagdani, CEO, 5Paisa.com said, by increasing the PMS limit SEBI has made it very clear that the major section of the retail investor should come via mutual fund route. Customised portfolio management is designated only for HNIs, hence clearly demarcating the customer categories.