The competition in the mutual fund space is set to intensify with Alternative Investment Funds (AIF), Portfolio Management Services (PMS) and wealth management firms lining up to enter this lucrative business.

The move comes when MFs are gearing up to move into AIFs and PMS territory with the launch of high-risk and high-reward product Specialised Investment Funds (SIF) with a comparatively lower entry barrier of ₹10 lakh.

The minimum threshold for investment in PMS is ₹50 lakh and for AIF is ₹1 crore.

SEBI allowed MFs to launch SIFs to discourage individual investors from venturing into futures and options and losing money.

Marcellus Investment Managers, Wealth First Portfolio Managers and Nuvama Wealth Managers are waiting in the wings after filing papers with SEBI to enter the MF space.

Recently Pantomath Capital Advisors, Capitalmind Financial Services and Jio Financial Services havereceived final approval from SEBI and will launch their MF business soon.

Unique investors

Currently, the MF industry has 46 players with overall asset under management of ₹66 lakh crore as of March-end and has over 5.39 crore unique investors.

Sunil Subramaniam, CEO of an independent think-tank Sense and Simplicity said, the launch of SIF by MFs poses AIF/PMS industry the challenge of retaining their customer base as SIFs are more tax efficient options. Hence, these players are now targeting an entry into MF space to launch SIF at a later stage, he said.

Currently, AIF and PMS players have to incur tax whenever they churn their portfolio but under SIF it can be done without tax implication and tax will be levied only at the time of redemption, he said.

By launching SIF, PMS and AIF can tap into the mass affluent investors base better than the existing MFs as they have a long track record of delivering on Long-Short funds and in the high risk-high reward product spectrum, said Subramaniam.

Deepak Shenoy, Founder and CEO, Capitalmind Financial Services said, the newly established Capitalmind AMC will introduce actively managed funds from its successful PMS strategies, including Adaptive Momentum and Surge India (which delivered a 28 per cent return over five years).

“We always envisioned MFs as the ideal vehicle to deliver sophisticated, rules-based strategies efficiently to retail investors, offering distinct operational and tax advantages,” he said.

Trivesh, COO, Tradejini said, SIF allows MFs to execute long-short strategies or high-conviction plays, which were earlier only possible through PMS or AIFs.

With a lower entry point of ₹10 lakh, he said investors can access these strategies with more structured and transparency than a PMS.

Published on April 15, 2025