ETMarkets PMS Talk | From mutual funds to PMS: Brijesh Ved on where PRIM
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Against this backdrop, SEBI’s proposed PRIM framework could potentially redefine what investors expect from a portfolio manager.
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Loading...×India’s wealth-management landscape is entering an interesting phase, with mutual funds, SIFs, PMS, AIFs and wealth-management platforms increasingly operating across overlapping parts of an investor’s portfolio.Against this backdrop, SEBI’s proposed PRIM framework could potentially redefine what investors expect from a portfolio manager.
At the heart of PRIM is a shift from simply selecting securities to constructing and managing an entire portfolio.
Portfolio managers could use mutual funds, ETFs, index funds, SIFs and other permitted instruments as building blocks, while taking responsibility for asset allocation, product selection, rebalancing and risk management.
So where exactly does PMS fit as India's wealth ecosystem evolves? Can PRIM make PMS more accessible without diluting its bespoke nature? And how should investors distinguish between a portfolio that is merely a collection of products and one built around a disciplined asset-allocation framework?
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In this segment of ETMarkets PMS Talk, Brijesh Ved, Head – PMS, Kotak Mahindra AMC, discusses how PRIM could reshape portfolio construction, the changing role of PMS managers, the opportunity created by the ₹25 lakh entry point, and why investors may need to look beyond one-year returns when evaluating PMS strategies. Edited Excerpts –
Q) PRIM seems to be a significant step forward for the PMS industry. What is the biggest structural change this introduces for portfolio managers and investors?
A) The biggest change is that PRIM adds a professional portfolio-construction layer above individual investment products.
Instead of investors independently assembling mutual funds, ETFs, index funds, and SIFs, a regulated portfolio manager can take responsibility for asset allocation, product selection, rebalancing, and risk control within a defined investment approach.
For portfolio managers, the role expands from security selection to becoming a portfolio architect; for investors, it creates clearer accountability and access to professionally managed portfolios at a lower entry point.
Q) PRIM allows PMS players to invest in direct mutual fund schemes, ETFs, index funds and SIFs. How do you see portfolio managers using these products differently from how a traditional mutual fund investor would?
A) Portfolio managers should use these instruments as building blocks within an overall risk-and-return framework, rather than as standalone product choices.
Active funds can be used where manager skill is valuable, ETFs and index funds where efficient market exposure is preferable, and debt, commodities, REITs, or SIFs for diversification and differentiated strategies.
The real value lies in deciding what to own, in what proportion, and when to rebalance, while managing overlap, costs, taxation, and portfolio behaviour across market cycles.
At Kotak DPMS, we have run a discretionary multi-asset strategy using active and passive equity funds, debt, REITs, InvITs, and precious metals ETFs for over four years now. Since inception, it has delivered 15.7% annualized returns against 12.2% for the Nifty Multi Asset Index.
This live track record proves that a structured asset-allocation framework combined with disciplined rebalancing delivers far superior risk-adjusted outcomes than simply holding a basket of funds.
Read more: SEBI’s new PMS framework could potentially double industry size over time: APMI Chairman Vikas Khemani
Q) With PRIM lowering the entry point to ₹25 lakh and the investment universe expanding, do you expect the PMS industry to become significantly larger over the next three to five years?
A) Unquestionably. Lowering the minimum ticket size to ₹25 lakh bridges the gap between retail mutual funds and high-net-worth PMS, opening the category to a much broader segment of emerging affluent investors.
Combined with large investable universe of different MF schemes, this will materially scale industry AUM over the next three to five years.
However, growth will not be uniform: managers with strong governance, differentiated processes, credible track records, institutional risk management, and effective distribution will gain disproportionately.
Q) PMS managers will get greater flexibility in exchange-traded derivatives, with exposure allowed up to 1.25 times client AUM. What additional risk-management responsibilities does it create?
A) The 1.25x limit must be viewed as a hard ceiling, never a leverage target. Derivative usage must be strictly mandate-driven—restricted to portfolio hedging, downside risk management, or systematic rebalancing—rather than speculative yield enhancement.
Managers will need to be very careful in usage of derivatives. Derivative usage should have a defined purpose i.e. Hedging and clients must understand the potential loss behaviour in usage of any derivatives.
SEBI’s proposed guidelines also emphasize explicit client consent, disclosure of derivative risks, and disciplined exposure measurement.
Q) SEBI is also enabling PMS managers to invest in foreign securities. How important is global diversification becoming for Indian PMS portfolios?
A) Global diversification is becoming structurally more important, particularly for affluent investors whose businesses, income, property, and existing financial assets may already be heavily concentrated in India.
However, global exposure shouldn't be a generic plug-and-play solution. It must be client suitability-driven, currency-aware, and aligned with the investor's long-term objectives.
Q) SEBI has proposed the concept of Independent Fund Managers. How could this change the PMS industry structure?
A) The IFM framework could create a platform-based PMS ecosystem. Investment professionals may focus on research, portfolio construction, and client outcomes, while an established registered portfolio manager provides dealing infrastructure, compliance, custody, technology, and reporting.
This could encourage entrepreneurial managers and more specialized strategies without requiring every manager to recreate the entire operating platform.
At the same time, oversight cannot be outsourced: the registered portfolio manager retains full responsibility and liability, making manager selection, monitoring, conflicts management, and reputational-risk controls critical.
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Q) With mutual funds, SIFs, PMS, AIFs and wealth-management products increasingly overlapping, where do you see PMS’s distinct role?
A) PMS should remain the bespoke managed-account solution. Its differentiation lies in an individually managed mandate, risk profiling, portfolio-level transparency, client-specific restrictions, direct accountability, and the ability to implement a defined investment approach around an investor’s objectives.
Mutual funds and SIFs remain pooled products; AIFs are better suited to alternative, listed, private-market, or specialized strategies; and wealth managers advise across multiple providers.
PMS occupies the space where a sophisticated investor wants professional customization and implementation without building an internal investment team.
Q) Should the industry move towards greater emphasis on risk-adjusted returns, drawdowns, consistency and portfolio behaviour rather than just one-year performance?
A) Absolutely. One-year performance is an outcome, not a sufficiently robust measure of investment quality. PMS strategies should be assessed through rolling multi-year alpha, drawdowns, downside capture, recovery periods, volatility, concentration, liquidity, turnover, tax efficiency, and consistency across market cycles.
Investors should also evaluate whether the strategy behaved as its mandate suggested during difficult periods.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
