Portfolio management services are provided by wealth management companies for high net worth individuals looking to take on additional risks and generate better returns than the market. The SEBI-mandated minimum investment requirement for these services is 50 lakhs.

Under PMS, a portfolio manager acts on your behalf and invests your capital in listed securities such as stocks, fixed income securities, and other structured products with the aim of generating high returns.

These are personalized services where you can track your portfolio, its performance, the risk exposure, etc. It is a great way for HNIs to generate alpha returns on their capital in the long run using the expertise of professional money managers.

Alternative Investment Funds ( AIFs )

As the name suggests, AIFs are more focused on investing in Alternative investments, which essentially are investment products other than the typical asset classes such as equity and debt. The asset classes invested in by AIFs include private equity, hedge funds, real estate, etc.

Another major distinguishing factor between AIFs and PMS is that AIFs are pooled investment funds. This means that money is pooled in from many different investors and the entire pool is invested in the above-mentioned asset classes. This does give away some of the personalization of portfolio management services but are a great way to gain exposure to Alternative asset classes as a diversification tool.

SEBI classifies AIFs into three different categories based on the kind of instruments they invest in. These are Category 1, Category 2, and Category 3 AIFs.

The SEBI-mandated minimum investment requirement of AIFs is 1 crore.

Both PMS and AIFs are great investment options for HNIs to diversify their portfolios and earn higher long term returns on their capital, albeit at higher risk. Where AIFs are pooled investment instruments, PMS are more personalized portfolio management services with both having their own benefits and limitations.