- Pooling of funds
There is no pooling of investor funds in PMS. Every independent PMS investor will need to open a separate Demat account.
In the case of an AIF, however, pooling of funds is required.
- Minimum Investment Amount
PMS requires a minimum investment of Rs. 50 lakh.
In the case of AIFs, a minimum investment of Rs. 1 crore is required.
- Minimum Corpus
There is no minimum corpus requirement for PMS.
AIFs must have a minimum corpus of Rs. 20 crore. The requirement for angel funds is lower, at Rs. 10 crores.
- Lock-in Period
Investors in PMS have the option to withdraw funds at any moment.
AIFs have a lock-in period to which closed-ended units must conform.
PMS is classified as discretionary or non-discretionary, depending on the fund manager’s authority.
AIFs, on the other hand, are divided into three categories based on where the funds are invested: Category I, II, and III.
Aside from the non-refundable application fee of Rs 1 lakh, the applicant must pay a registration fee of Rs 10 lakh when the registration certificate is issued for PMS.
You must pay a registration charge in addition to the application (non-refundable) fee of Rs. 1 lakh if you want to invest in AIFs. Upon issuing of the registration certificate, the expenses vary based on the AIF category.
When attempting to comprehend the differences between PMS and AIF, this is a vital factor to consider.
The securities under PMS do not have a set duration. Instead, the terms of a fund manager’s and investor’s agreement are legally binding.
The securities in AIF must have a minimum term of three years for Category I and II. This period of time can be extended for another two years. The extension is contingent on the approval of two-thirds of the AIF’s investors, as measured by the value of their investment. If there isn’t a majority to renew, the AIF is liquidated one year after it expires. The expiration date is one year after the commencement date or one year after the extended duration has passed. There is no such thing as a minimum tenure for Category III funds.
- Segregation of Funds
In PMS, each client’s funds must be split into distinct Demat accounts.
AIFs do not require segregation.
- Number of investors
The number of investors who can participate in PMS is not limited. The quantity of clients a fund manager has is entirely up to them.
AIF schemes can only have a maximum of 1,000 investors.
- Types of Funds
Based on the rights of the fund management, PMS is divided into Discretionary and Non-Discretionary Funds. Based on the end-use of funds pooled, AIFs are categorized into three categories: I, II, and III.
- Manager Contribution
While there are no particular restrictions for management contribution in PMS, AIFs do require managers to maintain their interests. Managers of Category I and II AIFs must keep at least 2.5 percent of the corpus or Rs. 5 crores, whichever is lower, in their hands.
Management for Category III AIF’s must hold at least 5% of the corpus or Rs. 10 crores, whichever is lower.
You’re better prepared to plan your future investment now that you know more about PMS vs AIF.