Investment advisors welcome SEBI's new PMS norm

Our Bureau Chennai | Updated on November 20, 2019

Some expect retail investors may move towards mutual funds

Investment advisors welcome the SEBI move to increase the networth criteria for PMS advisors and the minimum amount limit set for retail investors.

With a view to keep retail investors away from portfolio management schemes (PMS), market regulator on Wednesday decided to raise the minimum investment amount of clients for such schemes to Rs 50 lakh from the earlier Rs 25 lakh. The regulator has also increased the net worth requirement for PMS managers to Rs 5 crore from the current Rs 2 crore.

Ashish Shanker, Head - Investment Advisory, Motilal Oswal Private Wealth Management, said: “The SEBI announcement is positive. Moving the investment to Rs 50 lakh will ensure larger networth clients, who have the ability to work with an advisor come into portfolio management schemes. Increase in networth will ensure serious players remain in the business.”

By increasing the PMS limit SEBI has made it very clear that major section of the retail investors should come via mutual fund route. Customised portfolio management is designated only for HNIs, hence clearly demarcating the customer categories, said Prakarsh Gagdani, CEO,

Accrording to Anish Teli, Founder of IndexAlpha, a SEBI registered PMS, “We welcome those changes in guidelines that aim to make PMS products more transparent and investor friendly".

However, 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 ₹50 lakh, he said. The increase in networth requirements to ₹5 crore will also limit the number of new/existing businesses that want to obtain/retain the SEBI PMS registration, he added.

“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.”

Vasanth Kamath, CEO & Co-Founder, smallcase Technologies, said: "The PMS or AMC licenses are only two of many ways that SEBI allows investment professionals to showcase their research & create investable products. The other two common ones are Research Analysts (RAs) and Registered Investment Advisors (RIAs). These licenses have a lower networth requirement and other setup costs, and as such this directive will encourage even more investment professionals to apply for the RIA/RA license and create readymade portfolios with investor discretion for their clients.”

Published on November 20, 2019

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