Big Market Shift: SEBI Proposes Unleashing PMs to Invest Overseas and Adopt Higher Risk Strategies

Big Market Shift: SEBI Proposes Unleashing PMs to Invest Overseas and Adopt Higher Risk Strategies​

India’s securities regulator, SEBI, has introduced a sweeping proposal aimed at vastly expanding the investment avenues available to Portfolio Managers (PMs). The comprehensive overhaul seeks to significantly improve the ease of doing business in the market. These changes will allow PMs to invest both overseas and into previously restricted asset classes.

The proposed flexibility is driven by the massive growth of India's portfolio management industry. Assets managed by this sector surged from ₹18.07 trillion in April 2019. They grew to ₹42.61 trillion as of May 31, 2026, highlighting the demand for diversified and sophisticated investment solutions.

How SEBI Plans to Revolutionize Portfolio Management​

The proposals directly address the growing sophistication of the investor base and the demand for highly personalized portfolio strategies. By relaxing certain compliance requirements, SEBI aims to align Indian PMs with global standards seen in mutual funds and alternative investment funds.

A major aspect of this shift is the permission for PMs to invest in overseas securities. This move brings their operational scope into line with international fund managers.

Global Reach and Debt Exposure Are Key Features of New Rules​

SEBI has introduced a critical rule regarding debt exposure within portfolios. It proposes allowing up to 10% of client funds to be invested in unlisted debt. Currently, this type of investment is not permitted under existing regulations.

This push into unlisted assets will provide PMs with additional opportunities for diversification and potentially higher yields. The regulator believes these changes are necessary to meet the evolving needs of discerning investors.

Introducing Affluent Investor Segment and Advanced Derivatives Use​

The regulatory suggestions include defining a new, specialized category of Portfolio Managers. These managers would focus exclusively on exchange-traded funds and mutual fund schemes targeting affluent clients.

This segment is designed for individuals who may not meet traditional investment thresholds but possess a higher risk appetite than retail investors. For this specific PM category, the minimum client investment size would be halved to ₹2.5 million. The net worth requirement for such managers has also been proposed to be reduced to ₹20 million.

Furthermore, SEBI is significantly widening the scope of risk management within portfolios. The proposals permit the use of derivatives strategies up to 1.25 times the clients’ total asset value.

Operational Flexibility and Oversight in the Proposed PM Guidelines​

The regulator has also taken steps to streamline the operational requirements for Portfolio Managers (PMs). SEBI is exploring a model where independent fund managers can operate under a registered platform.

In this proposed structure, the registered portfolio manager would be responsible for ensuring all compliance and regulatory mandates are met. Additionally, if a PM’s assets fall below ₹1 billion, they would not be required to maintain a separate dedicated dealing room. The proposals will come into effect pending feedback from stakeholders. SEBI has set a deadline of August 13 for receiving comments on these extensive changes.