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PMS vs AIF: Key Differences Every Investor Must Know
- Ripradaman R
- 7 days ago
- 2 min read
Introduction
Portfolio Management Services (PMS) and Alternative Investment Funds (AIF) are premium investment products designed for high-net-worth investors in India.
Both offer professional fund management, but their structure, risk profile, and investment strategies are fundamentally different.
Understanding PMS vs AIF is critical before allocating capital.
What is PMS (Portfolio Management Services)
PMS is a personalized investment service where a fund manager directly manages an investor’s portfolio of stocks, bonds, or other securities.
Key characteristics:
Minimum investment typically ₹50 lakh
Investor owns individual stocks directly
Customizable portfolio strategies
Transparent holdings and performance reporting
Also read:
What is AIF (Alternative Investment Fund)
AIF is a pooled investment vehicle that invests in non-traditional asset classes such as private equity, venture capital, hedge strategies, and structured products.
Key characteristics:
Minimum investment typically ₹1 crore
Investors buy units of the fund, not direct assets
Structured as trusts or LLPs
Focus on alternative and illiquid investments
Intresting read:
PMS vs AIF: Structural Differences
PMS:
Direct ownership of securities
Managed on an individual basis
Highly transparent
AIF:
Pooled fund structure
Managed collectively for all investors
Limited transparency in underlying assets
Watch this video:
PMS vs AIF: Liquidity and Lock-in
PMS:
Relatively liquid
Stocks can be sold anytime (subject to manager discretion)
AIF:
Usually long lock-in periods (3–10 years)
Exit depends on fund lifecycle and market conditions
Taxation Differences
PMS Taxation:
Taxed at individual investor level
Capital gains tax applies on stocks
Tax liability depends on holding period
AIF Taxation:
Category I & II AIFs: Pass-through taxation
Category III AIFs: Taxed at fund level (complex)
Often involves sophisticated tax planning
Which is Better: PMS or AIF
Choose PMS if:
You want direct equity exposure
You prefer liquidity
You want transparent portfolios
Choose AIF if:
You seek private equity or venture capital exposure
You can lock money for long term
You want high-risk, high-reward strategies
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Conclusion
PMS and AIF serve different investor needs. PMS is suited for equity-focused investors seeking control and liquidity. AIF is designed for sophisticated investors targeting alternative assets and long-term capital appreciation.
The right choice depends on risk appetite, investment horizon, and portfolio diversification goals.
FAQ
1. Is PMS safer than AIF?
PMS generally has lower risk compared to most AIF strategies, but still carries market risk.
2. Can retail investors invest in PMS or AIF?
No. Both PMS and AIF are designed for high-net-worth investors with high minimum investment thresholds.
3. What is the minimum investment for PMS and AIF?
PMS: Typically ₹50 lakh
AIF: Typically ₹1 crore
4. Are AIF returns guaranteed?
No. AIFs are high-risk investments with no guaranteed returns.
5. Which has better returns: PMS or AIF?
Returns vary by manager and strategy. AIFs can deliver higher returns but with significantly higher risk and illiquidity.
Citations
Securities and Exchange Board of India (SEBI)
Association of Mutual Funds in India (AMFI)
Reserve Bank of India (RBI) publications
Industry reports by EY, PwC, and Deloitte
NSE and BSE investor education materials
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