Four regulated ways to have your money managed in India, with ticket sizes from ₹500 to ₹1 crore. Structure, tax treatment, transparency and who each one suits.

India now has four distinct regulated structures for professionally managed money, with minimum investments ranging from ₹500 to ₹1 crore. They differ in ownership structure, flexibility, transparency, cost and — importantly — how you are taxed.

Choosing between them is mostly a question of ticket size and what you actually need, not of which sounds most sophisticated.

The Four Structures at a Glance

Mutual Funds: The Default for Almost Everyone

Pooled, daily-priced, heavily regulated and cheap. Direct plans of index funds commonly carry total expense ratios in the 0.1–0.3% range.

The industry’s scale reflects this: AMFI reported net AUM of ₹82.22 lakh crore as of June 2026, with monthly SIP contributions of ₹31,781 crore and SIP assets of about ₹17.7 lakh crore.

Suits: essentially everyone, for the core portfolio. Limits: long-only mandates, category constraints, no customisation, and you cannot control when gains are realised inside the fund.

SIF: The New Middle Tier

Specialised Investment Funds were introduced by SEBI through a framework circular in February 2025, operative from 1 April 2025, to bridge the gap between mutual funds and PMS.

The key facts

• Minimum investment of ₹10 lakh at PAN level across all SIF strategies of a single AMC. This does not apply to accredited investors, and does not include your regular mutual fund investments with the same AMC.
• Regulated under the mutual fund framework, but permitted to run long-short strategies, sector rotation and dynamic asset allocation with defined derivative and leverage limits.
• Categories include equity long-short, hybrid long-short and debt-oriented strategies. An equity long-short strategy, for example, invests a minimum of 80% in equities and may take up to 25% uncovered short exposure.
• Fees and expenses follow Regulation 52 of the mutual fund regulations.

Adoption

The category grew quickly from a small base — from around ₹2,010 crore in October 2025 to roughly ₹9,711 crore by February 2026, with hybrid long-short strategies accounting for the majority. Multiple large AMCs have launched SIF platforms.

Suits: investors with ₹10 lakh-plus who want hedged or long-short exposure inside a regulated, mutual-fund-like structure. Limits: the category is young — most strategies have short track records, so you are underwriting a process rather than a proven record.

PMS: Direct Ownership at ₹50 Lakh

Portfolio Management Services are regulated under the SEBI (Portfolio Managers) Regulations, 2020. The minimum investment is ₹50 lakh per client — raised from ₹25 lakh in 2020 — and portfolio managers must maintain a net worth of at least ₹5 crore, with registration renewable every three years.

Three types

• Discretionary — the manager transacts without seeking approval for each trade. The dominant format.
• Non-discretionary — the manager advises, you approve each transaction.
• Advisory — recommendations only; you execute.

Key structural features

• You own the securities directly in your own demat account. This is the fundamental distinction from a mutual fund.
• Discretionary PMS cannot invest in unlisted securities; non-discretionary advisory portfolio managers are limited to 25% of AUM in unlisted securities.
• No leverage on equity portfolios, though hedging-related derivative strategies are permitted.
• Investment in securities of the portfolio manager’s related parties or associates is capped at 30% of client AUM, with client consent.
• All portfolio managers other than pure advisory must appoint a custodian.

The tax consequence people underestimate

Because you own the securities, every transaction the manager makes is a taxable event in your hands. A high-turnover PMS strategy can generate substantial short-term capital gains at 20% even in a year when your portfolio value barely moved. In a mutual fund, internal churn is not taxed to you — only your own redemption is.

This is a real cost difference, and it is frequently absent from performance comparisons.

What to check before signing

The Disclosure Document is filed with SEBI and publicly available. It contains the exact fee structure including all additional charges, investment restrictions, conflict-of-interest disclosures, key personnel qualifications, and any disciplinary actions or regulatory proceedings. Read it before the pitch deck.

Also confirm whether performance fees carry a high-water mark — without one, you can pay performance fees in a year that merely recovers a previous loss.

Suits: investors with ₹50 lakh-plus who want a concentrated, transparent, customisable portfolio and can tolerate higher volatility than a diversified fund. Limits: higher costs, tax drag from turnover, and — this matters — regulation protects you from operational fraud and misappropriation, not from a poor strategy or a bear market.

AIF: ₹1 Crore and Above

Alternative Investment Funds under the SEBI (AIF) Regulations, 2012, with a minimum investment of ₹1 crore.

• Category I — venture capital, SME, social and infrastructure funds
• Category II — private equity, private credit, real estate funds
• Category III — hedge-fund-style strategies, long-short, arbitrage, with the broadest flexibility on leverage and derivatives

Category III AIFs are taxed at the fund level, which simplifies your reporting but is not always more efficient. Categories I and II are largely pass-through.

Suits: investors with ₹1 crore-plus who want exposure to strategies or asset classes unavailable in public markets. Limits: illiquidity, long lock-ins, capital drawdown schedules, and wide dispersion of outcomes between managers.

A Straightforward Decision Path

• Below ₹10 lakh investable: mutual funds. There is no serious alternative, and none is needed.
• ₹10–50 lakh: mutual funds as core. Consider a SIF only if you specifically want hedged or long-short exposure and accept a short track record.
• ₹50 lakh–1 crore: mutual funds still work well. PMS is worth considering only if you want direct ownership and concentration, and have understood the tax implications of turnover.
• Above ₹1 crore: the full menu is available. Keep the core in low-cost funds and treat PMS and AIF as satellites.

The uncomfortable truth is that a well-constructed portfolio of low-cost index and flexi-cap funds is a legitimate answer at every level of wealth. Higher minimums buy access and customisation. They do not buy better returns.

Frequently Asked Questions

Is PMS better than mutual funds?

Different, not better. PMS offers direct ownership, concentration and customisation. Mutual funds offer lower cost, better tax efficiency on internal churn, and daily liquidity. Compare returns net of fees and tax before concluding.

What is the minimum investment in PMS?

₹50 lakh per client, as prescribed by SEBI. Individual portfolio managers may set higher thresholds.

How is a SIF different from a mutual fund?

It sits under the mutual fund regulatory framework but permits long-short strategies and higher derivative usage, with a ₹10 lakh minimum at PAN level across all SIF strategies of an AMC.

Do PMS returns shown in marketing include fees and tax?

Performance is typically shown net of fees but not net of your personal tax. Since you own the securities, the tax on turnover is yours. Ask for the portfolio turnover ratio.

Sources and Further Reading

• SEBI (Portfolio Managers) Regulations, 2020 — sebi.gov.in
• SEBI circular dated 27 February 2025 on the Specialised Investment Fund framework
• SEBI (Alternative Investment Funds) Regulations, 2012
• AMFI monthly industry data — amfiindia.com