PMS vs AIF: What’s the Difference and Which Investment is Right for You?

Key Takeaways:

Understand the core difference between PMS and AIF to choose the right investment route.
PMS offers a more personalized investment experience, while AIFs offer pooled investments in niche opportunities.
Ticket size, liquidity, and tax treatment are key factors in the PMS vs AIF comparison.
Portfolio Management Services are ideal for investors seeking customized equity exposure.
Alternative Investment Funds are suited for investors seeking diversified exposure and thematic strategies.
Aequitas offers both PMS and AIF products, catering to different investor profiles with strong long-term performance.

Understanding PMS and AIF: A Quick Overview

What is PMS (Portfolio Management Services)?

Portfolio Management Services (PMS) are customized investment solutions managed by professional fund managers. These portfolios are tailored to individual investors, allowing for strategic stock selection and active monitoring. PMS is ideal for HNIs seeking personalized equity exposure with higher transparency.

What is AIF (Alternative Investment Fund)?

An Alternative Investment Fund (AIF) is a pooled investment vehicle that collects capital from investors for investing in assets beyond traditional stocks and bonds—such as private equity, hedge funds, venture capital, and structured products. AIFs are suitable for investors looking for thematic, long-term investments.

PMS vs AIF: Key Differences Explained

Regulatory Structure and SEBI Classification

PMS is regulated under SEBI (Portfolio Managers) Regulations, 2020.
AIFs are governed by SEBI (Alternative Investment Funds) Regulations, 2012.
AIFs are further classified into Category I, II, and III based on their investment strategy.

Minimum Investment Amount

PMS requires a minimum investment of ₹50 lakhs. However, elite PMS providers like Aequitas PMS require a higher minimum—to ensure a more curated and high-performing investment experience.
AIFs require a minimum investment of ₹1 crore, making them more accessible to affluent investors seeking structured products. Aequitas also offers an AIF investment opportunity, having exposure in the same equity asset class as PMS, i.e., listed equities.

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Risk-Return Profile

PMS portfolios are equity-heavy and tailored, hence returns and risks are investor-specific.
AIFs may have exposure to public equity, private equity, debt, or hybrid strategies—making their risk-return matrix more diverse.

Investment Strategy and Portfolio Diversification

PMS focuses on listed equities and multibagger strategies tailored to client needs.
AIFs can invest in a wider universe, including public equities, unlisted companies, infrastructure, real estate, etc.

Transparency, Reporting, and Liquidity

PMS offers high transparency with regular portfolio reporting.
AIFs can have lock-ins, therefore, usually have lower liquidity and offer limited disclosures during the fund’s lifecycle. Aequitas’ AIF is an open-ended fund, and the disclosures are made to investors on a monthly and quarterly basis.

Taxation Differences Between PMS and AIF

PMS taxation is based on individual holdings—STCG, LTCG, and dividends apply directly to the investor.
AIFs (Category I & II) enjoy pass-through taxation while Category III AIFs may be taxed at the fund level. Aequitas’ AIF is a category III AIF.

AIF vs PMS: Which Suits Your Investment Goals?

Parameter	Portfolio Management Services (PMS)	Alternative Investment Fund (AIF)
SEBI Regulation	SEBI (Portfolio Managers) Regulations, 2020	SEBI (Alternative Investment Funds) Regulations, 2012
Investment Structure	Individually managed portfolios	Pooled investment vehicle
Minimum Investment as per SEBI	₹50 Lakhs	₹1 Crore
Suitability	Ideal for investors seeking personalized equity exposure	Suitable for investors seeking thematic and diversified exposure
Portfolio Customization	High – Tailored as per investor’s goals	Low – Follows predefined investment strategy
Asset Classes	Primarily listed equities	Can include listed equities, private equity, debt, real estate, infrastructure
Liquidity	Relatively higher – Investors can exit as per their discretion	Lower liquidity – Can be close-ended or open-ended, with lock-in periods
Transparency & Reporting	High – Regular reports, direct ownership of securities	Limited – Periodic fund-level reporting only
Taxation	Taxed at the investor’s level (STCG/LTCG based on holding period)	Category I & II: Pass-through taxationCategory III: Taxed at fund level
Risk-Return Profile	Moderate – Depending on investment style of fundhouse	Diversified – Risk varies based on AIF category and underlying asset class
Management Approach	Actively managed, contrarian or thematic depending on the PMS provider	Strategy-specific (VC, public equity, private equity, hedge funds, etc.)
Access to Aequitas Strategy	Yes. 12 year old product, started in 2013.	Yes, started in March, 2019.
Best Use Case	HNIs with long-term horizon seeking a customized, high-alpha equity portfolio	Investors looking to diversify with expert-managed pooled investments and lower ticket size access

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AIF vs PMS for HNIs: What Do the Experts Recommend?

Experts recommend PMS for HNIs with a higher transparency and a need for control, while AIFs are ideal for investors seeking alternative avenues, long-term themes, and diversification.

Key Factors to Consider Before Choosing Between PMS and AIF

Investment Horizon

PMS suits long-term investors with at least a 3–5 year horizon.
AIFs typically have a lock-in period, and the strategy can be open-ended or close-ended.

Risk Appetite

PMS comes with direct market exposure.
AIFs are diversified into public equities or private equities, sometimes high-risk strategies like VC or distressed assets.

Customization Needs

PMS provides 1-on-1 customization.
AIFs are pooled with fixed mandates.

Exit Flexibility

PMS portfolios offer greater liquidity.
AIFs often come with lock-in periods and predetermined exit terms.

Final Verdict: PMS or AIF – Which is Right for You?

If you are a seasoned investor looking for a highly personalized investment strategy and direct exposure to Indian equities with a long-term outlook, Aequitas PMS could be the right fit. Let’s look at the factors that make Aequitas the best PMS in India:

A 12-year track record with a stellar 32% CAGR.
Tailored portfolios crafted to your specific risk-return profile.
A long-term, contrarian approach with <20% annual churn rate.
In-house primary research-driven stock picking focused on multibagger opportunities.

However, if you are seeking access to Aequitas’ expertise but prefer a lower investment threshold, consider the Alternative Investment Fund (AIF) offered by Aequitas. Their AIF gives you access to Indian listed equities and professional fund management.

Whether you go for PMS or AIF, Aequitas’ performance history makes it one of the best PMS and top AIF in India, driven by a disciplined, research-led philosophy.

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Conclusion: Making an Informed Investment Decision

When choosing between PMS vs AIF, your decision should be based on investment goals, liquidity needs, risk appetite, and ticket size. While PMS offers a tailored approach with full transparency, AIFs give you diversified exposure across themes and asset classes.

Both have their merits, and with the right investment partner like Aequitas—offering both portfolio management services and alternative investment funds—you can align your strategy to meet your wealth creation objectives with confidence.

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