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A SEBI consultation paper on Friday suggested that the minimum investment amount for PMS should be doubled to ₹50 lakh.
“Portfolio management services, unlike mutual funds, are more complicated and riskier products and are meant for investors with higher risk-taking capacity,” the paper said.
The working group has proposed a minimum investment amount of ₹50 lakh so that small savers can be prevented from taking exposure in PMS that technically carry higher risks, such as concentration risk, illiquidity, wide investment mandate, etc, the paper added.
Market regulator SEBI on Friday came out with a consultation paper on portfolio managers with a series of proposals and is seeking public comments by August 30.
The paper also increased the minimum net worth of PMS managers to ₹5 crore from the current ₹2 crore.
Among the other proposals include disclosure of performance metrics. The working group has recommended that returns may be calculated using time-weighted rate of return (TWRR). While calculating returns using TWRR, all cash and all investments in liquid funds, i.e., the cash drag has to be mandatorily included; and performance has be reported net of all fees, all expenses and taxes, it added.
Qualification criteria
The paper also enhanced the qualification criteria. Now, the principal officer should have NISM certification too besides the current criteria such as professional qualification in finance, law, accountancy or business management from a university or an institution recognised by the Central government or any State government or a foreign university.
PMS should have a principal officer, compliance officer and at least two employees, said the new proposal.
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