SEBI plans to give portfolio managers more freedom to invest client money

The Securities and Exchange Board of India (SEBI) has proposed easing compliance requirements for portfolio managers and widening the range of assets in which they can invest client funds, as part of a broader review of the regulatory framework governing the industry.

In a consultation paper issued on Thursday (July 23), the capital markets regulator proposed allowing portfolio managers to invest in securities that are yet to be listed, overseas listed equity and debt securities, among other instruments.

If approved, the proposals would give portfolio managers greater freedom to diversify client portfolios beyond the investment avenues currently permitted.

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Aim is to improve flexibility and ease of doing business

SEBI said the proposals are intended to improve the ease of doing business while providing portfolio managers with greater flexibility in managing client portfolios.

The move also seeks to align regulations with the changing needs of high-net-worth investors, who are increasingly looking for customised investment strategies and access to a wider range of asset classes.

Review comes as PMS industry expands

The regulator said the review was prompted by the rapid growth of the Portfolio Management Services (PMS) industry.

Assets under management (AUM) in the sector have grown to ₹42.61 trillion as of May 31, 2026, from ₹18.07 trillion in April 2019.

"Considering the increasing sophistication of investors, growing demand for more personalised solutions and diverse investment portfolio, a need was felt to review the Portfolio Manager Regulations," SEBI said in the consultation paper.

The more than doubling of industry assets over the past seven years reflects the rising popularity of PMS offerings among wealthy investors seeking bespoke investment management.

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Overseas investments and unlisted debt on the table

SEBI said allowing PMS providers to invest in overseas securities would bring them in line with mutual funds and Alternative Investment Funds (AIFs), both of which already have provisions for overseas investments.

At present, portfolio managers are not permitted to invest in unlisted debt instruments.

The regulator has now proposed allowing up to 10% of a client's portfolio to be invested in such securities.

Unlisted debt can potentially offer higher yields than listed bonds, but it also carries greater liquidity and credit risks. By capping exposure at 10%, SEBI appears to be balancing greater investment flexibility with investor protection.