When I first engaged with the world of alternative investments through PMS and AIF in India, I quickly discovered that the two were often lumped together—but in practice they couldn’t be more different. At PMSAIFWorld, our journey has been about helping investors make sense of “PMS returns comparison and best AIF funds in India”, and here is what I’ve learned through real experience.
My journey: From curiosity to clarity
A couple of years ago I sat down with a client who was investing for the long-term and had a sizeable corpus. We evaluated setting up a portfolio via a Portfolio Management Service (PMS) versus an Alternative Investment Fund (AIF). The appeal of PMS was clear: direct ownership of stocks, transparency, and customised strategy. The appeal of AIF: access to niche strategies, higher return potential, but with trade-offs in liquidity and minimum investment size.
At PMSAIFWorld, we started comparing PMS returns and AIF returns. What we found: some PMS schemes offer strong alpha over benchmark, but results vary widely by manager. Similarly AIFs can deliver very high returns, but they come with much higher risk and less liquidity. A recent study found AIFs generated on average about 52 basis points above their benchmarks—but the dispersion was high.
PMS returns comparison vs AIF: what the data says
From our database at PMSAIFWorld, a few patterns stand out:
Many PMS funds are designed for large-ticket investors (₹50 lakh+ per regulatory minimum) and offer customised portfolios.
AIFs typically have even higher entry points (₹1 crore+) and may involve longer lock-ins and less liquidity.
In FY 2024-25, long-only AIFs tracked by one source delivered average returns of ~8.7%—modest compared to prior boom years.
PMS funds, when top-performing, have shown meaningful outperformance, especially when you consider risk‐adjusted returns. For example, one PMS manager cites a 8.5% average annualised alpha over five years.
In short: If you compare “PMS returns vs AIF returns”, you cannot say one is categorically better. It depends heavily on strategy, manager, fees, lock-in, and liquidity. At PMSAIFWorld we emphasise that watchers should look beyond headline return numbers toward consistency, risk control, downside capture, and fee structure.
Best AIF funds in India: what matters and how to pick
From our experience advising clients at PMSAIFWorld, here are criteria to identify strong AIFs:
Track record: How many years has the fund operated? Are results audited?
Strategy clarity: Is it long-only, long-short, niche asset class (real-estate, credit, startups)?
Liquidity & lock-in: What is the investor lock-in period? What exit windows exist?
Fees & carry: What management fees + performance fees do you pay? Are they aligned with investors’ interest?
Transparency / reporting: How often are valuations published? What disclosures exist?
While I cannot endorse any specific fund, PMSAIFWorld’s comparison tool shows that among AIFs tracked, those with disciplined risk management and moderate leverage tended to outperform in volatile markets. The “top decile” performers often combine equity + credit + niche asset exposure rather than pure small-cap bets.
My personal recommendation based on experience
If I were to summarise for a serious investor:
If you have ₹50 lakh-₹1 crore or more, and you want customised equity exposure with relatively better liquidity, a PMS may be effective.
If you have ₹1 crore+, are comfortable with longer lock-ins, and seek alternative asset exposure (beyond listed stocks), then certain AIFs are worth adding to your portfolio.
Always combine the AIF allocation with your broader goals, and keep it as one ‘satellite’ exposure rather than the only game in town.
Use PMSAIFWorld’s comparison engine to check returns, risk metrics and compare funds side by side.
FAQs
Q1: What minimum investment is required for PMS and AIF?
A: For PMS in India, the minimum is typically ₹50 lakh per investor (as per recent guidelines). For AIFs, many funds require a minimum of ₹1 crore (or more) depending on category.
Q2: Are AIF returns always higher than PMS returns?
A: No. Although some AIFs invest in niche strategies and may deliver high upside, the volatility, illiquidity and risk are higher. PMS returns can beat benchmarks too—but much depends on the manager, strategy and cost. The average AIF outperformance above benchmarks has been modest in many years.
Q3: How do taxes differ between PMS and AIF?
A: In a PMS, the investments are in your name and taxation follows your capital gain profile. In AIFs, depending on the category (I/II/III) and the structure, tax treatment can differ (for example pass-through or fund-level taxation). Always confirm latest rules and get tax advice.
Q4: What should I look for when comparing AIF funds?
A: Key criteria: strategy clarity, track record, fee structure, lock-in / exit terms, risk management. At PMSAIFWorld we always advise clients to ask for one-page fee illustration, historical annualised returns, number of investors, redemptions allowed, etc.
Q5: Should retail investors invest in PMS or AIF?
A: Generally not. PMS and AIFs are targeted at high‐net-worth investors (HNIs) and sophisticated structures. Retail investors may be better served with mutual funds unless they meet the thresholds and understand the risks.