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PMS and AIF

Portfolio Management Services or PMS, is a service offered by the Portfolio Manager or an asset management company, is an investment portfolio in stocks, fixed income, debt, cash and other securities, managed by a professional fund manager that can potentially be tailored to meet specific investment objectives. Unlike mutual funds, where investors own units of the mutual fund scheme, in a PMS, the investors own individual securities. Although the portfolio managers may oversee hundreds of portfolios, your account may be unique.

Types of PMS

Discretionary PMS:

Under this service, the choice as well as the timings of the investment decisions is solely lies with the Portfolio Manager.

Non-Discretionary:

Under this service, while the portfolio manager will suggest only the investment ideas, the investor will decide the investment timings and decisions regarding the portfolio. However the execution of the trades is done by the PMS portfolio manager.

Advisory

Under this service, while the PMS portfolio manager only suggests the investment ideas, the decision as well as the execution of the investment decisions rest solely with the Investors.

Benefits of a PMS

Professional Management

The PMS Service provides professional management of stock portfolios with the main objective of delivering long-term performance while minimising risk.

Continuous Monitoring

The PMS fund manager, constantly monitors the portfolio and periodic changes are made by him/her to optimise the performance.

Flexibility

The Portfolio Manager has fair amount of flexibility in terms of holding cash, for example, it can keep the cash holding even up to 100% depending upon his./her understanding of the market conditions. The portfolio manager can create a reasonable concentration in the investor portfolios by investing disproportionate amounts in favour of foreseeable opportunities in the market situation.

Risk Control

The research team of the PMS Service, provides real time information to support the fund management team and thus control the risk.

Ease of Operation

Portfolio Management Service provides the clients with a customised service and takes care of all the administrative aspects and provides periodic portfolio reporting. It discloses the overall status of the portfolio, holdings and performance on a daily basis. For this, the PMS Service provides a login ID and password for the investor to check his/her PMS details.

Custom made Advice

For select clients, the PMS provider gives the benefit of tailor made investment advice designed to achieve investors various financial goals.

Alternative Investment Funds or AIF in short, are defined as privately pooled investment funds and categorized by The Securities Exchange Board of India (SEBI) as Category I AIF, Category II AIF, and Category III AIF. It is a fund of funds (FOF) that invests in asset classes other than stocks, bonds, Government securities, fixed deposits or cash. It pools money from various HNI investors and invests them under different investment categories as specified by the SEBI for the benefit of investors.

Assets under management (AUM) under AIF can include start-ups, SME funds, infrastructure funds, private equity funds, venture capital or even hedge funds that may be trading in listed or unlisted derivatives depending on the fund type.

The minimum investment amount to invest in an AIF is Rs 1.00 Crore depending on the type of AIF. Therefore, it can be called as product meant for the HNIs.

Advantages of AIF

AIF offers diversification as the key benefit. AIFs have considerable freedom to decide where to invest unlike most other funds or mutual funds which are totally regulated and follow the fund/ scheme guidelines as mandated by SEBI.

There are various non-traditional investment options available to AIFs which generally are not available to all investors, particularly retail investors.

How AIF works?

Alternative Investment Funds or AIF raise money to form an investment fund pool that invests in non-traditional assets classes that the ordinary investors may not have access through any other products like Mutual Funds. Money can be pooled from various types of investors, example - Resident Investors, NRIs or non-resident investors or foreign investors.

Who can invest in AIF?

AIFs are mainly aimed at high net worth or HNI individuals who are ready to invest minimum Rs 1.00 Crore and take high risk. While the return potential of AIF may be very high, the risk is also very high. Therefore, this is not meant for all investors excepting those who are well versed with these kind of investing.

In summary, if you have a large amount to invest in one instrument

You have the ability to sustain the risk

You are ready to remain invested with long lock-in periods