Smaller PMS players are finding cumbersome compliance processes and related costs stifling growth and skewing the playing field in favour of larger players.
The Sebi has constituted an ease of doing business committee where it has taken up the compliance cost issues for discussion, said people familiar with the developments.
The road to hell is paved with good intentions, goes the saying, which Portfolio Management Services (PMS) funds may quite agree with.
Smaller PMS players are finding compliance processes cumbersome, with additional costs stifling growth and skewing the playing field in favour of larger players.
“Compliance costs have risen of late because of the new regulations, making it difficult for smaller PMS to compete,” said Divam Sharma of Green Portfolio.
Moneycontrol spoke to seven fund managers and attempted to calculate the minimum compliance costs for a PMS, which has worked out to Rs 31.6 lakh per annum. Operating costs like lease, IT systems, and salaries adds up to roughly another Rs 95 lakh.
Assuming, the PMS gets a 1 percent management fees, it would need at least Rs 125 crore in AUM to break-even.