What PMS and AIFs are
Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) sit a step beyond mutual funds. Both are regulated by SEBI, PMS under the Portfolio Managers Regulations, 2020 and AIFs under the AIF Regulations, 2012. Both are meant for investors who can commit large sums and live with higher risk.
A PMS is a professionally managed portfolio held in your own demat account. You see every stock, every trade and every charge. An AIF is a privately pooled fund: you subscribe to units, and the manager invests in private equity, private credit, venture capital, real estate or listed-market strategies, depending on the category.
How they work in India
| PMS | AIF | |
|---|---|---|
| Minimum | ₹50 lakh | ₹1 crore for most investors |
| Structure | Separate account in your name | Pooled fund; you hold units |
| Key document | Disclosure document | Private placement memorandum (PPM) |
| Liquidity | Exit possible, subject to exit load | Cat I and II closed-ended; Cat III open or closed |
| Tax | Each sale taxed in your hands | Cat I and II largely pass-through; Cat III generally taxed at fund level |
With most AIFs, you sign a commitment and the fund draws the money in stages through capital calls. Money comes back as investments are sold, so the full cycle can run for several years. Plan your cash flows around this, because you cannot simply redeem when you need funds.
Who should consider them
These products suit investors who already have an emergency fund, adequate insurance and a core of diversified investments, and who are comfortable with:
- a concentrated portfolio that can swing more than the market,
- money locked away for years, in the case of most AIFs,
- fee structures that take careful reading.
If you are below the minimums or need regular access to your money, mutual funds give exposure to many of the same asset classes with daily liquidity, lower minimums and a single capped expense ratio.
Things to compare before you choose
- Returns net of fees. SEBI requires portfolio managers to report performance net of all fees and expenses against a common benchmark. Look at good years and bad ones.
- Total cost. How fixed fees, performance fees, hurdle rates and the high-water mark interact under different return scenarios.
- The team and process. Who runs the money, how long the strategy has existed, and how it behaved in past falls.
- Exit terms. Exit loads, AIF tenure and any extension clauses.
- Overlap. How much of the portfolio duplicates what you already own through mutual funds or shares.
Our team puts these side by side and reads the fine print with you. The investment decision stays yours.
