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How is PMS different from AIFs?
- Pooling of funds: In PMS, there is no pooling of investor funds. A separate Demat account needs to be created for every independent PMS investor. Whereas in the case of AIF, pooling of funds is a necessity
- Minimum Investment Amount: A minimum investment of Rs. 50 lakh is required for PMS. In the case of AIFs, an investor must invest at least Rs. 1 crore
- Minimum Corpus: PMS requires no corpus amount. For AIFs, corpus needs to be a minimum of Rs. 20 crore. For angel funds, the requirement is lower, at Rs. 10 crore
- Lock-in-period: PMS investors have the choice to withdraw funds at any point in time. Close-ended units in AIFs have a lock-in period to which they must adhere
- Categories: PMS are of two types; discretionary and non-discretionary based on the authority of the fund manager. On the other hand, AIFs are grouped into three – Category I, II, and III, depending on where the funds are invested
- Tenure: In PMS, there is no defined tenure for the securities. Instead, the agreement term between a fund manager and an investor is binding. In AIF, the tenure of the securities for Category I and II is a minimum of three years. This tenure can be further extended by
another two years. The extension is subject to the approval of two-thirds of the investors by value of investment in the AIF. In case of no majority to extend, the AIF gets liquidated within one year following expiration. The expiration date is considered one year from the start date or a year from the extended time. There is no minimum tenure for Category III funds
- Segregation of Funds: Every client’s funds have to be segregated into separate Demat accounts in PMS. No segregation is required in AIFs
- Number of investors: There is no cap specified on the number of investors for PMS. A fund manager can have any number of clients. The maximum number of investors to any AIF scheme cannot exceed 1,000
- Types of funds: PMS is categorized as Discretionary and Non-Discretionary Funds based on the rights of the fund manager. AIFs are classified into Categories I, II, and III based on the end-use of funds pooled
- Manager Contribution: While PMS has no specific requirements on Manager contribution, AIFs require managers to have continued interest. In the case of Category I and II of AIFs, managers should hold at least 2.5% of the corpus, or, Rs. 5 crores, whichever is lower. For Category III AIFs, a manager should hold at least 5% of the corpus, or, Rs. 10 crores, whichever is lower.