SEBI chief U K Sinha is believed to have urged fund officials to diversify into AIF and PMS space, said sources. He was addressing fund officials at the AMFI AGM held recently in Mumbai.
AIF
Of 44 AMCs, only a handful of them have launched AIFs. Currently, Indiabulls, Reliance, DSP Black Rock, Edelweiss, IIFL, IDFC, ICICI Prudential and HDFC are among the players who have ventured into the AIF space. A majority of them have launched category II AIFs, which are private equity funds, debt funds and fund of funds. Fund officials say that taxation is a deterrent for launching AIFs.
Nevertheless, the commitments raised by AIFs is rising rapidly. AIF managers raised commitments worth Rs. 50,441 crore from individual and institutional investors as on June 2016, up from Rs. 24,873 crore in June 2015.
PMS
SEBI chief has reportedly urged AMCs to also look at launching PMS products. Currently 22 AMCs have PMS licences. Motilal Oswal, Sundaram, Invesco, Birla Sun Life, BNP Paribas MF and Reliance are the ones who are active in PMS space. According to rough industry estimates, the MF industry manages 30,000 crore in plain vanilla equity PMS funds.
Since the minimum investment amount in these funds is Rs. 25 lakh, such products are primarily meant for ultra HNIs.
Compared to mutual funds, PMS gives more flexibility to fund houses. They can charge a higher fee and enjoy a broader investment mandate. For instance, SEBI rules prescribe certain limits on each sector and stock which mutual funds are not permitted to breach. PMS funds do not have any such restrictions. Further, unlike mutual funds, PMS funds are not restricted by any cap on the TER.
PMS assets and the number of clients are growing at a healthy rate. According to SEBI, the total number of PMS clients increased to 52,288 in 2015-16 from 46,706 in 2014-15. A majority of them (88%) were taking discretionary service.
The AUM of the portfolio management industry increased by 12.7% to Rs. 10.45 lakh crore from Rs. 9.27 lakh crore in 2014-15. The discretionary services offered to EPFO/PFs constituted 70.3% of the total assets under the management of portfolio managers followed by advisory services which constituted 16.7 %.
Portfolio managers are required to have a minimum net worth of Rs. 2 crore to get PMS license.
