GIFT City regulator proposes lower PMS ticket size, opens door to retail funds

The International Financial Services Authority (IFSCA), which regulates GIFT City, has proposed a reduction in the minimum ticket size for portfolio management services (PMS) from $150,000 to $75,000, or about ₹64 lakh at current exchange rates, according to a consultation paper released on Monday. This brings the minimum ticket size for PMS closer to the ₹50 lakh stipulated by markets regulator Sebi for onshore PMS schemes.

IFSCA has also taken note of the tax parity accorded to retail funds and ETFs in the recently Union budget. It has lowered the minimum size of a retail fund in GIFT city to $3 million.

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At present, GIFT City is dominated by non-retail funds (alternative investment funds), which have a minimum ticket size of $150,000 and rules about the maximum number of investors per fund. There are 116 fund management entities (FMEs) at GIFT City which run about 143 AIFs. They have collectively raised commitments of $11.7 billion.

Some AMCs, such as Mirae Asset, have launched feeder AIFs that invest in domestic mutual fund schemes under this licence. However these funds are limited by the large minimum ticket size.

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No more tax uncertainly

There are currently no active retail funds in GIFT city owing to the tax uncertainty that dogged them previously. This uncertainly was cleared up in Budget 2024. Retail funds in GIFT City can invest in Indian and global stocks, bonds and mutual funds. However the Indian component cannot exceed 50% of the corpus to avoid violating round-tripping rules.

Portfolio management services have also taken root in GIFT City. There are currently 19 fund management entities that offer PMS services in IFSCA with $1.5 billion in total assets under management and advisory. Prominent PMS players include Saurabh Mukherjea’s Marcellus, which follows an outbound (global) strategy. The regulator’s proposal to halve the minimum ticket size for such PMSes could provide a big boost to the industry.

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