Difference between PMS & AIFs (2024)

FAQs

Difference between PMS & AIFs? ›

PMS is offered by expert portfolio managers or management services firms to high-net-worth individuals (HNIs) as well as retail investors. AIFs primarily serve high-net-worth individuals (HNIs), institutional investors, and other accredited investors. The funds are not pooled.

These funds are well-suited for a broad spectrum of investors, including those with smaller investment amounts. In contrast to mutual funds, investments in PMS are tailored for high net-worth individuals (HNIs) possessing a substantial investible surplus, typically beginning from ₹25 lakh or more.

An AMC as private placement cannot be promoted to the public, and there is a limitation in the number of professional investors you can approach with it. This is related to the chosen AMC solution and jurisdiction. The AIF, on the other hand, can be distributed to professional investors without limitation.

Alternative Investment Fund is a special investment category that differs from conventional investment instruments. It is a privately pooled fund. Generally, institutions and HNIs invest in AIFs as substantial investments are required.

Traditional investments are easily tradable in the open market, providing high liquidity. Alternative investments, however, are often less liquid. They typically require a longer investment horizon due to lock-up periods or the nature of the asset class.

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

Alternative Investment Funds (AIF for short) are those funds created or established in India as a privately pooled investment vehicle in order to collect funds from specific investors as per a previously defined investment policy.

AIFs are often designed to generate better returns compared to traditional investments. The diverse range of assets and strategies they employ can lead to uncorrelated performance with the stock and bond markets. If leveraged strategically, AIFs may perform well despite fluctuating market conditions.

In contrast, an AIF will generally be defined as those funds that do not satisfy the criteria for regulation as UCITS. AIF examples include hedge funds, private equity funds, real estate funds and even (in the slightly more obscure areas of the market), funds formed to invest in rare coins or fine wines.

Hedge funds are a type of alternative investment fund (AIF) that invest in a variety of assets with a large degree of flexibility. While hedge funds themselves are not directly supervised in the UK, hedge fund managers are authorised and regulated by the FCA.

What is the difference between a UCITS and AIF? ›

UCITS are open-ended funds and may be established as a Unit Trust, ICAV, Common Contractual Fund (CCF) or Variable or Fixed Capital Companies. AIFs can be established as a Unit Trust, ICAV, Common Contractual Fund (CCF), Investment Company or Investment Limited Partnerships.

Some examples of AIF in India include 021 Capital Trust, 108 Capital Venture Fund, Banyantree India Growth Capital Fund, Capitalmind Select India One, Deserve Innovation Fund, etc. How many AIFs are there in India? As of Dec 07, 2023, there are 1207 AIFs listed on SEBI.

Within that, from a regulatory perspective, there are essentially two main designations: Undertakings for the Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs). UCITS are primarily for non-professional or “retail” investors and AIFs are any fund other than a UCIT.

Many alternative investments, such as hedge and private equity funds, use a partnership structure with a general partner that manages the business and limited partners (investors) who own fractional interests in the partnership.

Risks of Alternative Investments

Alternative investments are more complex than traditional investment vehicles. They often have higher fees associated with them. As with any investment, the potential for a higher return means higher risk.

their returns are much greater for the same reason. AIF gives the investor an avenue to pool in funds with the flexibility to invest in derivatives, listed & unlisted equity shares, debt instruments, real estate, hedge fund, etc. Thus, it is riskier than PMS and its returns are greater than that of PMS and MF.

A manager of managers approach is typically used within institutional investment programs. It differs from a fund of funds strategy since it involves comprehensive investment programs and not individual investment fund products.

PMS investment approaches consistently outperformed mutual funds across all timeframes. For example, in the five year period, 59 per cent of PMS investment approaches outperformed their benchmarks compared to just 46 per cent of mutual funds.

The fund manager is the person responsible for implementing a fund's investing strategy and managing its trading activities. A fund can be managed by one or more people.

FUM excludes other assets the financial institution may manage, such as cash deposits or real estate holdings. In summary, while AUM includes all assets a financial institution manages, FUM is a subset of AUM that only provides for the value of assets within investment funds.