For many investors, diversification means holding a few mutual funds across equity, debt, or gold. For high net-worth investors (HNIs), it goes deeper. True diversification is about combining different strategies and asset classes so the portfolio behaves differently across market cycles.. This is why many HNIs are gradually moving beyond traditional mutual funds and fixed income to options like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs). Let’s explore these investments in detail.
Why HNIs Are Expanding Beyond Mutual Funds
Mutual funds still play an important role in HNI portfolios because they offer liquidity, transparency, and broad market exposure. However, affluent investors often look for more than just market-linked returns. They seek customisation, better risk control, and access to opportunities that are not available in the broader market.
India’s wealthy investor base is growing fast. As per some reports, the number of high net-worth individuals (HNIs) in India is expected to double to about 1.65 million by 2027. With more people accumulating larger investable surpluses, the demand for customised and advanced investment options like PMS and AIFs is naturally rising, going beyond traditional mutual funds.
This shift is clearly visible in the growth of PMS and AIF investments in India. Over the last 10 years, from FY14 to FY25, the PMS and AIF segments have grown at an impressive compound annual growth rate (CAGR) of around 33%. If this growth trajectory continues, the overall industry is expected to cross ₹100 lakh crore by 2030, highlighting the growing role of alternative investments in HNI portfolios.
Portfolio Management Services (PMS)
A Portfolio Management Service is a SEBI-regulated investment service where professional portfolio managers build and manage a customised investment portfolio for an investor.
Unlike mutual funds, PMS portfolios are tailored to individual goals, risk appetite, and time horizon. The investments are held directly in the investor’s own demat account, offering full transparency and ownership.
The minimum investment for PMS is ₹50 lakh. This high entry barrier ensures that PMS is suitable only for investors who have sufficient financial capacity and can handle market volatility.
How PMS Is Different from Mutual Funds
Mutual funds pool money from different investors. Everyone in the scheme holds the same portfolio, and every decision impacts all investors equally.
In PMS:
- Your money is not pooled
- Securities are held in your personal demat account
- Portfolios can be customized
- Portfolio managers have greater flexibility in stock selection and position sizing
To understand PMS better, including its types and structure, read: What Is Portfolio Management? A Simple Guide for Modern Investors
Alternative Investment Funds (AIFs)
AIFs are designed to invest in assets beyond traditional stocks and bonds. They pool money from sophisticated investors and invest in areas such as private equity, venture capital, private credit, real estate, and structured strategies.
If we talk about AIF vs MF, AIFs are not meant for short-term liquidity or daily trading. They are designed for investors who can stay invested for several years and are comfortable with relatively higher risk in exchange for potentially higher returns.
Because AIFs are more complex and long-term in nature, they are mainly chosen by HNIs, family offices, and institutions. With a minimum investment of ₹1 crore, they are designed for investors with a higher risk capacity.
To understand AIF better, including it’s types and how it works, checkout: Alternative Investment Fund (AIF)
PMS vs AIF - Which is Better?
Features | PMS | AIF |
Minimum Investment | ₹50 lakh | ₹1 crore |
Investment Structure | Individual, customised portfolio | Pooled investment structure |
Level of Customisation | High | Moderate (strategy-based) |
Lock-in Period | No fixed lock-in; investors can withdraw anytime (as per terms) | Close-ended AIFs have a fixed lock-in period for the fund tenure |
PMS is better suited for investors who want greater control, transparency, and flexibility, with portfolios tailored to their individual goals. AIFs, on the other hand, are ideal for investors comfortable with longer lock-ins who want access to alternative and unlisted opportunities.
Final Takeaway
High net-worth investors approach investing very differently from retail investors. Mutual funds often form the core of a portfolio, offering diversification, liquidity, and long-term growth. Along with this, investments like PMS and AIFs help add depth through customised strategies and exposure to alternative assets. Used together, these investments help HNIs balance stability and growth while managing risk across market cycles.
If you’re looking to build a diversified portfolio using mutual funds, PMS, or AIFs, Ashvvy Investments can help you plan investments based on your goals and risk profile.
