Updates
Updates
Portfolio Management Services (PMS) is a type of investment service that provides personalized portfolio management for high-net-worth individuals (HNIs) and institutions. They invest across equities, fixed income, debt, cash, structured products and other individual assets that are managed by a professional money manager. PMS allows investors to have direct ownership of stocks and to customize their portfolios according to their specific needs and risk preferences. PMS also offers differentiated and high-risk-high-return strategies that may appeal to more sophisticated investors. Portfolio managers use a variety of investment strategies to build and manage portfolios that meet the specific needs of their clients. PMS has a high investment requirement of INR 50,00,000, thus limiting access to retail investors.
Alternative Investment Funds (AIFs) are a type of investment fund that invests in a variety of assets that are not typically available to retail investors. They are collective investment vehicles that invest in alternative assets such as private equity, venture capital, hedge funds, real estate, commodities and derivatives. AIFs are regulated by the Securities and Exchange Board of India (SEBI) and are classified into three categories based on their investment strategy and target investors. Alternative Investment Funds offer investors access to diverse and niche strategies that may generate higher returns than traditional assets. AIFs also have more flexibility in terms of fee structure, leverage, valuation and governance. However, AIFs have a very high minimum investment of 1 crore rupees, limiting the entry for retail investors. AIFs also have higher risks due to illiquidity, volatility and lack of transparency.
| Basis of Difference | PMS | AIFs | MFs |
|---|---|---|---|
| Structure | Individually managed | Privately pooled investment vehicles | Pooled investment vehicles |
| Investment Objective | High Returns | High returns, capital preservation, or diversification | Long term growth and income |
| Regulation | SEBI (Portfolio Managers) Regulations 2020 | SEBI (Alternative Investment Funds) Regulations 2012 | SEBI (Mutual Funds) Regulations 1996 |
| Minimum Investment | INR 50 Lakhs | INR 1 Crore | INR 500 |
| Ownership | Direct ownership of stocks | Indirect ownership through units or shares | Indirect ownership through units |
| Customization | High degree of customization | Low to moderate degree of customization | No customization |
| Types | Discretionary PMS, Non-Discretionary PMS, Active Portfolio Management, Passive Portfolio Management | Category I AIFs, Category II AIFs, Category III AIFs | Equity, Debt, Hybrid, Solution Oriented and Other. |
| Strategy | Differentiated and high-risk-high-return strategies | Diverse and niche strategies | Conventional and low-risk-low-return strategies |
| Taxation | Taxed as per individual’s slab rate on capital gains | Taxed as per the nature of income and fund category | Taxed as per the type and holding period of fund |
| Transparency | High transparency on portfolio holdings and transactions | Low transparency on portfolio holdings and transactions | Moderate transparency on portfolio holdings and transactions |
| Liquidity | Low to moderate liquidity depending on the stocks held | Very low liquidity due to lock-in periods and exit loads | High liquidity depending on the type of fund |
| Investor Eligibility | HNIs and institutional investors | Sophisticated investors | All types of investors |
| Fees | Entry Load, Management Charges, Exit Load and Profit Sharing | Management Fee and Profit Sharing | Total Expense Ratio |