Difference Between Mutual Fund vs PMS vs AIF
- 5 min read
If you are an experienced investor or even new to investments, you must be aware of different investment options to diversify your portfolio and optimise your returns.
Mutual Funds, Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) are investment options and services with potentially higher returns and investment management.
Therefore, you must learn the difference between Mutual Fund vs PMS vs AIF to guide yourself towards your financial goal. Read this blog and understand each option and the differences.
What Does Portfolio Management Service Define?
Portfolio Management Service (PMS) is a specialised service provided by securities market and financial experts. Based on your risk tolerance, your financials, investment preferences and other factors, they offer you a tailored investment roadmap that suits your needs.
They help you invest in diverse assets, like equity, cash, debt, structured products and more and ensure optimised returns with proper guidance.
Depending on the PMS types, you can have decision-making authority for investments or hand over your investment decisions completely to a portfolio manager.
What Do Alternative Investment Funds Define?
Alternative Investment Funds (AIFs) allow you to invest in specific funds that are usually not traded by any retail investors. This is a type of collective investment in securities, such as hedge funds, venture capital, real estate, private equities, etc.
As an investor, if you opt for AIFs, you can strategise your investments in a way that generates higher returns compared to traditional securities.
Furthermore, an AIF comes with higher market risk due to factors such as its higher liquidity and market volatility.
What Does a Mutual Fund Define?
To differentiate between Mutual Fund vs PMS vs AIF, you must learn what a Mutual Fund (MF) means. The working mechanism of a mutual fund involves pooling the money of investors like you in a portfolio, containing securities, such as bonds, stocks and other securities.
By following a predetermined strategy and investment objectives, fund managers oversee your investments in such funds.
If you opt for a mutual fund, you get the flexibility of portfolio diversification, tax efficiency, low-cost access, systematic investment options, etc.
Difference Between Mutual Funds vs PMS vs AIF
Although they are good investments and management options, you should learn their key differences. The following table contains the differences between MF vs PMS vs AIF:
| Particulars | Mutual Funds | Portfolio Management Services | Alternative Investment Funds |
| Structure of investments | It is a collective investment option that pools money from other investors. | This allows you to optimise your investment strategies for optimised returns. | It helps you invest in alternative options that are unavailable to retail investors. |
| Type of investors | This type of fund is suitable for a retail investor. | Individuals with a high net worth might prefer this option to manage their assets and investments. | Individuals with significant capital for investment can opt for such options. |
| Minimum investment amount | If you are a retail investor and prefer mutual funds, you can start investing in them with INR 500. | If you fall into the HNI category, the expenses of such services can go up to INR 50 lakh. | The minimum amount of AIFs is INR 1 crore. |
| Types | You can invest in security types, such as debt, equity, hybrid, etc. | Available PMS are non-discretionary, discretionary, active, and passive portfolio management. | AIFs are available in three categories: AIF I, II, and III. |
Conclusion
Having an understanding of the differences between Mutual Fund vs PMS vs AIF helps you make informed investment decisions. While Mutual Funds are more affordable, PMS and AIF require you to have significant investment capital.
FAQ’s
1. Who can invest in PMS, AIF, and Mutual Funds?
Retail investors can opt for mutual funds, whereas HNIs can afford a PMS. For AIF investment, you need a minimum investment amount of INR 1 crore.
2. What is the minimum investment amount required for PMS, AIF, and Mutual Funds?
The minimum investment amount for a mutual fund is INR 500, and for PMS, it is INR 50 lakh. For AIF, the minimum amount is INR 1 crore.
3. How is the ownership of assets structured in PMS compared to AIF and Mutual Funds?
When you opt for a PMS, all securities are held completely under your name, whereas in mutual funds or AIF, you own a unit of the chosen fund.
4. What are the regulatory authorities governing PMS, AIF, and Mutual Funds in India?
The SEBI regulates investment options, such as PMS, AIF, and Mutual Funds, to maintain integrity, transparency, and compliance.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
