Everything you should know about PMS & AIF investments

Nick Haase, Founder of Loot, once said something very simple yet extremely profound – “You only have so many hours in a day, let others make the money for you!” While he meant this in the context of building a company and bringing in talented employees, the same concept can be applied to investing. As an individual, you have a variety of roles to play, but only a limited amount of time. You may have a business to manage, a family to spend time with and hobbies you wish to pursue. And, in addition to all these aspects, you also need to manage the money you have earned through years or even decades of hard work.

Now, ask any investor and they will tell you how arduous and time consuming it is to make all your investment decisions yourself, especially if you have a large corpus at hand. From tracking the market and keeping an eye on financial news, to placing your bets at the exact right time, investing is a full-time endeavour. Not giving your portfolio the time and expertise it requires to flourish is one of the quickest ways to lose the money you have spent years accumulating. And while you have the option of investing in mutual funds, the schemes on offer are not tailored to fit the unique requirements of sophisticated investors.

Potent avenues to tap

When an investor matures beyond the scope of mutual funds, the evolving financial ecosystem in India offers you more sophisticated options such as portfolio management services and alternative investment funds. While AIFs are special financial instruments which invest in assets beyond traditional avenues encompassing listed stocks, bonds and cash, PMS involves professional management of your portfolio, by a renowned third-party entity. Through AIFs, you can gain exposure to comparatively untapped assets such as private equity, hedge funds, derivatives, real estate, and commodities. Alternatively, choosing PMS will allow you to invest across stocks, debt instruments and structured products, through a personalised strategy focused on your liquidity and risk appetite.

According to SEBI data, in 2022, the discretionary PMS vertical in India experienced 14% absolute year-on-year growth in its assets under management, scaling to a massive INR 22.4 trillion by December. Separately, the domestic AIF industry witnessed approximately 105% compounded annual growth rate over the past decade, reaching a combined AUM of INR 6.41 trillion in 2021-22. These stellar figures indicate the growing appeal of PMS and AIF, amidst the rising number of high net-worth individuals in India keen on expanding their wealth and maximising on hitherto untapped opportunities. So, is this the right time for you to turn towards these avenues?

Is PMS+AIF right for you?

Let us begin by considering your investor profile. Have you already exhausted traditional investment avenues such as gold, real estate, mutual funds and fixed deposits? Are you keen on accessing hyper-personalised investment options which are tailored to your unique requirements? Are you willing to pay more to benefit from the expertise of experienced wealth managers capable of generating market-beating returns and sustaining your wealth for the long term? If you answered yes to one or more of these questions, then it is time to add PMS and AIF in your nuanced investment portfolio.

You should veer towards PMS and AIF if you are looking to expand your portfolio and earn high returns, in the face of a riskier scenario. Additionally, given the comparatively non-liquid nature of these investments, consider PMS and AIF investments only if you have a medium to long term time horizon. As an HNI, you need to make wise decisions to accumulate and sustain your wealth and allocating about 15-20% of your portfolio to such sophisticated avenues could be the next best step.

Remember, money saved is money earned, but it is equally important to make your money work for you. And, at this stage in your portfolio, a combination of PMS and AIF may be the best way to make your money work harder.

This article is authored by Sameer H Lalwani, CFP of True Wealth

Disclaimer: This article is a promotional feature and it doesn't have journalistic/editorial involvement of Hindustan Times.