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Below the Quote on SEBI's new PMS framework by Vikas Gupta, CEO & Chief investment Strategist at OmniScience Capital

It is good that SEBI has provided a lower entry threshold for a mutual fund PMS. It will provide the benefit of discretionary portfolio management, i.e. switching between funds or rebalancing, it is not clear which segment of mutual fund distributors or investment advisors will find it useful. The direct beneficiaries will be some larger investment advisors who were primarily advising HNIs or mass affluent client categories while offering a portfolio of direct plans and ETFs. Another category could be some larger mutual fund distributors but, typically, they were not constrained by ticket sizes even earlier. some midsized MFDs might find it useful. However, the question of fees comes in. What fees they will be able to charge as a MF-only PMS provider vs. what they are compensated by the mutual funds when selling regular plans. NFOs and PMS/AIFs or other product categories for distribution provide the MFDs with an opportunity to increase their total income. But it is possible that some of them will find the MF-PMS route helpful in terms of operational ease of portfolio management. Allowing PMSes to invest in unlisted debt is something to watch how it evolves. While there is a limit to the percentage of aum that can be invested in unlisted debt, this creates exit risk since a PMS is an open-ended structure. In most cases the unlisted debt portion will have to be redeemed directly to the client instead of cash. IPO investing is again we are not too excited about since the typical IPO is likely to be overvalued and hence not a great opportunity for clients. In principle, the new framework is a good move by SEBI allowing PMS firms access to a wider universe of securities. However, in practice the mainstream PMS will focus on equities with a goal to generate alpha over the benchmarks for the clients.

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