AIF/PMS

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What is Alternative Investment Fund (AIF) and Portfolio Management Services (PMS)?

AIF

IFs or Alternative Investment Funds are a category of privately pooled investment funds that invest in assets other than traditional investments like stocks, bonds, and cash. AIFs are regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012.

AIFs mainly invest in assets like private equity, venture capital funds, hedge funds, real estate, infrastructure, and other alternative investments. These funds are capable of providing potentially higher returns but have a higher risk of investment as compared to traditional investment options.

SEBI has classified AIFs into three categories and the minimum investment into an AIF is Rs 1,00,00,000 which ultimately limits the entry for retail investors. The categories of AIF as per SEBI are Category I, Category II, and Category III.

PMS

Portfolio Management Services (PMS) are a specialized form of investment service that oversees a range of investment vehicles such as stocks, bonds, commodities, and other securities on behalf of investors.

Within PMS, investors receive tailored investment solutions tailored to their specific investment objectives, risk appetite, and investment horizon. Portfolio managers leverage their expertise and in-depth research to construct investment portfolios and manage assets designed to align with the investors’ goals. PMS typically levies higher fees for delivering personalized services, which may take the form of a fixed percentage of Assets Under Management (AUM) or fixed fees. These fees can vary depending on factors such as portfolio size, degree of customization required, or the chosen investment strategy tailored to meet the financial objectives of the investor.

What are the key reasons to choose Alternative Investment Funds (AIF) and Portfolio Management Services (PMS)?

AIF PMS
Pooling of funds is the essence of this investment model. Funds are not pooled, and investors have separate Demat accounts.
The maximum number of investors to any AIF scheme cannot exceed 1,000 There is no cap specified on the number of investors
SEBI-mandated minimum investment amount: 1 Cr SEBI-mandated minimum investment amount: 50 Lakhs
A minimum corpus of Rs. 20 crore is required. For Category-I angel funds, Rs. 10 crore is necessary. No corpus amount requirements
In close-ended AIF, investors must adhere to the lock-in period. PMS investors can withdraw their funds at any time.

FAQs

Investors that desire to diversify might pick Alternative Investment Funds to invest. All Indians, including NRIs, PIOs, and OCIs, are eligible to invest in AIFs. They must, however, fulfill the qualifying requirements, which include a minimum capital of Rs20 crore for each programme and Rs10 crore for Angel Funds. Each investor shall make a minimum investment of Rs1 crore or Rs25 lakh (in the case of AIF employees, directors, and fund managers).

A mutual fund is a pooled investment entity, with numerous participants raising cash. Mutual investments include stock, bonds and financial-market instruments, whereas alternative investment funds (AIF) are distinct from traditional standard investments such as stocks, debt securities, etc. Investments in a wide range of assets.

High-net-worth individuals (HNIs) wishing to diversify their investment portfolio might consider AIFs, which provide a high return potential while also carrying a high level of risk. AIFs invest in securities other than stocks, bonds, mutual funds, and other traditional investments, allowing investors to diversify their portfolios and have access to higher-yielding assets.

Individuals and Non-Individuals such as HUFs, partnerships firms, sole proprietorship firms and Body Corporate.

A PMS investor’s tax burden would be the same as if the investor were directly accessing the capital market. However, the investor should get advice from his tax expert in this regard. At the conclusion of the financial year, the Portfolio Manager should produce an audited statement of accounts to assist the investor in determining his or her tax responsibilities.