PMS vs AIF: What’s the Difference Between PMS and AIF in India?

Key Takeaways

• PMS and AIF work very differently, even though both cater to HNIs. PMS gives you a personalised portfolio; AIF pools investor money into one fund.
  
• PMS in India generally starts at ₹50 lakh, while AIFs usually begin at ₹1 crore.
  
• PMS offers more visibility and flexibility; AIFs typically come with longer lock-ins but open doors to alternate strategies.
  
• The right choice depends on your comfort with liquidity, transparency, risk, and investment horizon.
  
• Aequitas, one of India’s recognised PMS specialists, helps investors navigate both structures objectively.
  

Intro

If you’ve been evaluating PMS or AIF for a while, you’ve probably realised the terms sound deceptively similar. They aren’t. This guide breaks down the differences in plain English.

What Is PMS in India?

Most investors first encounter Portfolio Management Services (PMS) when they want their money handled more thoughtfully than a mutual fund allows — tailored to them, not the masses.

A PMS creates a portfolio that is quite literally yours:

• You hold the stocks in your name.
  
• You can view the portfolio composition.
  
• You see exactly where your money sits.
  

And of course, the investment strategy tends to be high-conviction, often leaning toward listed equities.

If you’d like a sense of how PMS works in practice, you can browse the Aequitas offering here:
👉PMS in Mumbai, India

A few supporting guides if you’re exploring PMS for the first time:

• Types of PMS in India
• Minimum Investment for PMS

What Is AIF in India?

An Alternative Investment Fund (AIF) is structured very differently. Instead of building a portfolio for each investor, the fund manager pools capital, runs one strategy, and allocates units in the fund.

This structure makes AIFs suitable when investors want exposure to:

• Private equity
  
• Venture capital
  
• Long-short equity strategies
  
• Credit funds
  
• Distressed assets
  
• Real estate or structured products
  

If PMS is a personalised meal, AIF is a chef-curated banquet — you share the menu with everyone else at the table.

Learn more about AIFs here:

AIF Guide for India

AIF Minimum Investment

AIF Categories in India (Explained Simply)

AIF categories are often confusing, so here’s the simplest way to look at them:

Category I: Early-Stage & Development Themes

Think startups, SMEs, infrastructure.

• Lower risk than Cat II/III
  
• Long lock-ins
  
• Investors are backing long-term growth themes
  

Category II: Private Capital (Higher Risk)

Think private equity, real estate, distressed assets, structured credit.

• Higher return expectations
  
• Higher risk
  
• Longer lock-ins (5–7+ years)
  

Category III: Hedge-Fund Style Strategies

Think long-short equity, quant, derivatives.

• Highest volatility
  
• Strategies react more quickly to markets
  
• Used by sophisticated investors
  

Get the full category breakdown here:
👉AIF Categories & Types

PMS vs AIF: A Practical Comparison

The Quickest Possible Summary

Where the Industries Stand (2025 Data)

A brief snapshot, so you know the scale:

• AIF commitments have crossed ~₹14.18 lakh crore (SEBI, 2025).
  
• PMS discretionary assets are around ₹32,000 crore and trending upward as more HNIs choose direct stock ownership.
  
• Category III AIFs have seen the strongest year-on-year growth.
  

This helps put things in context: both industries are growing, but they serve different investor needs.

Taxation: PMS vs AIF — What Changes for You?

PMS Taxation

This depends on what the PMS invests in.
If it’s listed equity:

• STCG: 20%
  
• LTCG: 12.5% above exemption
  

The exact tax treatment mirrors the underlying asset.
More here:
👉Guide to PMS in India

AIF Taxation

This varies dramatically by category:

• Category I & II: Pass-through taxation
  
• Category III: Tax rules vary based on structure
  

Full breakdown here:
👉AIF Taxation Guide

Fee Structures: What You Actually Pay

PMS Fees

Most PMS providers follow a familiar model:

• 1–2% management fee
  
• Performance fee of 10–20% (above hurdle)
  
• Custodian + brokerage costs
  

AIF Fees

AIF fees tend to be higher because of fund-level costs:

• 1.5–2.5% management fee
  
• 10–20% carry
  
• Auditor, trustee, compliance fees
  
• Some strategies also involve transaction-level costs
  

How They Behave in Different Markets

PMS in Various Cycles

• In bull markets: High-conviction PMS portfolios may outperform.
  
• In bear markets: Drawdowns can be sharper, but you can exit positions.
  
• Visibility: You can see portfolio changes instantly.
  

AIF in Various Cycles

• Category I/II: Slower valuation changes (private assets aren’t repriced daily).
  
• Category III: Moves quickly — sometimes too quickly — due to derivatives.
  
• Lock-ins: Limited ability to exit during stress.

Real Investor Scenarios (This Is Usually What Helps People Decide)

Investor A — Wants Flexibility & Transparency

• Surplus: ~₹60 lakh
  
• Wants to understand exactly what they own
  
• Prefers liquid listed equities

Best Fit: PMS

Investor B — Comfortable with Long Lock-ins

• Surplus: ₹5 crore+
  
• Wants exposure beyond public markets
  
• Can stay invested through cycles
  

Best Fit: Category II or III AIF

Investor C — Wants a Balanced Allocation

• Surplus: ₹1–2 crore
  
• Wants liquidity AND high-alpha alternates
  

Best Fit: PMS + AIF mix

Choosing PMS or AIF: A Simple Framework

You lean toward PMS if you:

• Prefer transparency
  
• Want direct ownership
  
• Value liquidity
  
• Want steady reporting
  👉Aequitas PMS 

You lean toward AIF if you:

• Seek alternative assets
  
• Are comfortable with lock-ins
  
• Want private-market exposure
  👉 Aequitas AIF

Why Many HNIs Choose Aequitas

Aequitas is widely recognised for:

• A performance track record that goes beyond 12 yrs., built on high-conviction investing
  
• Transparent communication, 1-1 Investor Relations
  
• Strong research-led processes
  
• Clear investor education (especially around PMS vs AIF decisions)
  

If you’re evaluating PMS options, this practical guide might help:
👉How to Choose the Best PMS Schemes

FAQs About PMS vs AIF in India

1. What is the main difference between PMS and AIF?

PMS gives you a tailor-made portfolio you directly own. AIF pools investor capital and invests it collectively.

2. What is the minimum investment for PMS vs AIF?

• PMS: ~₹50 lakh
  
• AIF: ₹1 crore
  

3. Which is better for HNIs?

There isn’t a universal answer. PMS suits those wanting transparency and liquidity. AIF suits those seeking alternative strategies and higher potential alpha.

4. Are PMS and AIF taxed the same way?

No. PMS taxation mirrors the underlying asset; AIF taxation is category-specific.

5. Can I invest in both?

Yes. Many investors create a blend depending on liquidity needs and risk tolerance.

Conclusion

The PMS vs AIF choice ultimately comes down to your comfort with structure, liquidity, visibility, and investment horizon. 

• PMS works well if you want clarity and control. 
• AIFs appeal if you’re ready for longer lock-ins in exchange for potentially higher alpha.
  

Aequitas helps investors evaluate both options with an independent, research-backed lens.

Explore Aequitas PMS here:
👉 https://www.aequitasindia.in/portfolio-management-services-in-mumbai-india/

Explore Aequitas AIF here:  👉https://www.aequitasindia.in/alternative-investment-funds-aif-in-india/