PMS Bazaar recently organised a webinar titled “MF-PMS: Is This the Next Big Wealth Management Opportunity,” which featured Mr. Sandeep Jethwani, Co-Founder, Dezerv & Vice Chairman, APMI.

This blog covers the important points shared in this insightful webinar.

The webinar blog covers insights from Mr. Jethwani, which includes the proposed Mutual Fund Portfolio Management Services (MF-PMS) framework and its potential impact on India’s wealth management landscape. It explained the proposed lower investment threshold, the need for professional mutual fund selection, behavioural coaching and disciplined portfolio management. It also examined Deserv’s ASAR and PRISM frameworks, highlighting their data-driven approach to fund selection, allocation, risk management and rebalancing.

Key aspects covered in this webinar blog are

• The regulatory landscape and the birth of MF-PMS 
• The complexity crisis and the challenge of fund selection 
• The value proposition of professional oversight and the Deserv framework 
• The PRISM framework and rigorous portfolio selection 
• Reframing PMS as a wealth management service 
• Timelines, structure, and fiduciary accountability 

Summary: The session highlighted the proposed Mutual Fund Portfolio Management Services (MF-PMS) framework and its potential to broaden professional portfolio management. Mr. Sandeep Jethwani explained how the proposed ₹25 lakh entry threshold could expand investor access while addressing fund-selection complexity and behavioural challenges. He discussed Deserv’s ASAR and PRISM frameworks, which combine quantitative analysis, qualitative assessment, disciplined allocation and rebalancing. The proposed model emphasises transparency, professional oversight, fiduciary accountability and systematic portfolio management across mutual funds and ETFs.

Mr. Sandeep Jethwani started the session by sharing his expert perspectives on one of the most anticipated regulatory developments in the Indian wealth management ecosystem: the introduction of the Mutual Fund Portfolio Management Services (MF-PMS) category. Drawing from over two decades of industry experience, he explored how this regulatory shift promises to transform investment approaches, address market complexities, and democratise professional portfolio management for a broader segment of investors.

The Regulatory Landscape and the Birth of MF-PMS

The Securities and Exchange Board of India (SEBI) issued a forward-looking consultation paper on portfolio management service regulations, introducing the concept of MF-PMS. While final regulations are still awaited, Mr. Jethwani expressed appreciation for the proactive approach taken by SEBI and the Association of Portfolio Managers in India (APMI) in evangelizing this asset class.

Under traditional regulations, a standard PMS requires a minimum ticket size of 50 lakh rupees and a portfolio manager net worth of five crores, accompanied by stringent operational requirements. In contrast, the proposed MF-PMS framework suggests lowering the minimum investment threshold to twenty-five lakh rupees. While this represents a fifty percent reduction, the implications are profound. Because wealth distribution follows a pyramid structure, lowering the threshold dramatically expands the eligible investor base to approximately four times that of a standard PMS. Furthermore, SEBI has proposed relaxing certain operational and certification requirements for providers, effectively democratising the portfolio management ecosystem. MF-PMS strategies are proposed to be exclusively permitted to invest in mutual funds, exchange-traded funds, and structured index funds.

The Complexity Crisis and the Challenge of Fund Selection

A central theme of the discussion addressed why a specialised service is necessary for selecting mutual funds. Analysing category benchmarks reveals that only about fifty-two per cent of funds beat their category benchmark—essentially a coin toss. Furthermore, past performance is rarely a reliable indicator of future success; data indicates only a twenty-five percent probability that a top-quartile fund today will remain in the top quartile three years later.

The financial consequences of fund selection are substantial. A seven-year historical analysis comparing a top-quartile fund with a bottom-quartile fund demonstrated a staggering return delta of one and a half crores on a one-crore investment base. Despite these high stakes, investor behaviour often leans toward chasing past performance, with the vast majority of capital flowing into funds only after they have already experienced peak cycles.

Compounding this challenge is the sheer market complexity. With over forty mutual fund houses offering anywhere from ten to one hundred schemes each, investors are frequently overwhelmed by data. Although the rise of direct mutual fund plans has helped investors save on distributor commissions, data shows that direct plan investors do not necessarily outperform regular plan investors. Often lacking professional guidance and handholding, direct plan investors tend to churn their portfolios rapidly—with sixty percent of direct plan assets under management held for less than two years—ultimately missing out on full market cycles.

The Value Proposition of Professional Oversight and the Deserv Framework

Mr.Jethwani emphasised that the proposed MF-PMS framework bridges this gap by offering professional execution, behavioural coaching, and disciplined rebalancing to everyday affluent investors. Beyond generating potential alpha through disciplined asset allocation, professional portfolio management ensures complete transparency, external custody of assets, and seamless succession planning.

Detailing how Deserv approaches this opportunity, he highlighted their proprietary ASAR framework—encompassing Access, Selection, Allocation, and Rebalancing. By processing millions of data points through advanced data pipelines, the firm evaluates the vast universe of mutual funds. Selection is powered by PRISM, a sophisticated data science model that analyses:

The PRISM Framework and Rigorous Portfolio Selection

Mr. Jethwani detailed how Deserv evaluates and constructs its mutual fund portfolios using a structured quantitative and qualitative model called PRISM, backed by a twenty-member investment team that includes dedicated data science engineers. The model analyses roughly two and a half million data points refreshed monthly across five core pillars:

• Portfolio construction (P): A deep dive into underlying holdings concentration, AUM scalability, liquidity, price-to-earnings, price-to-book, and return on equity.
• Risk and return (R): Evaluation of metrics like the Sharpe ratio, Sortino ratio, and Jensen's alpha to ensure excess returns compensate for the risk assumed.
• Investment environment (E): Accounting for macroeconomic contexts, such as interest rate cycles, liquidity, and geopolitical factors.
• Style and sector exposure (S): Tracking the historical behaviour and consistency of fund managers across various market cycles and previous asset management tenures.
• Momentum (M): Monitoring where capital flows are heading to understand market behaviour and sentiment.
  

A rigorous maker-checker risk management process follows this data-driven filtering, final fund manager reviews to account for qualitative risks like key-person risk, and advanced execution platforms. Highlighting performance outcomes, Mr. Jethwani noted that their flagship diversified strategy successfully turned one crore into 1.8 crores over four years—outperforming the benchmark BSE 500 total return index—while maintaining a strong focus on downside capture to help clients stay invested through market cycles.

Reframing PMS as a Wealth Management Service

Addressing a fundamental question about whether MF-PMS introduces a new product or a new way of wealth management, Mr. Jethwani asserted that the category is best viewed as a service rather than a product. Much like consulting a doctor when medical information is widely accessible via the internet, investors require professional guidance to manage execution, overcome behavioural hurdles, and time transactions properly.

Furthermore, the proposed twenty-five-lakh entry threshold serves as a vital "stepping stone" that will encourage broader participation, building investor comfort before scaling up to traditional fifty-lakh PMS structures. On the topic of taxation, he reassured participants that investors face no tax disadvantage. Mutual fund taxation operates at the scheme level identically to direct investments, with the added benefit that a professional portfolio manager can proactively execute tax-loss harvesting during rebalancing.

Timelines, Structure, and Fiduciary Accountability

Regarding regulatory timelines, Mr. Jethwani anticipated that final guidelines could emerge within a few months following the July consultation paper, giving the industry necessary time to ramp up compliance, risk profiling, and account-opening workflows. While specifics on subsidiary structures and net worth relaxations (such as a potential reduction to two crores) remain subject to final notification, the anticipated easing of dealing room and certification requirements will greatly benefit boutique and high-quality managers.

Finally, tackling the question of accountability in a two-layer structure—where an MF-PMS selects mutual funds and underlying AMCs select securities—Mr. Jethwani firmly emphasised that ultimate responsibility rests with the PMS manager. Because the entire mutual fund universe is available for selection, portfolio managers cannot shirk their duty; they must own both the asset selection and the overall portfolio performance, ensuring complete fiduciary alignment with the client.

Mr. Jethwani covered all the topics mentioned above in-depth and answered questions from the audience toward the end of the session. For more such insights on this webinar, watch the recording of this insightful session through the appended link below.

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