SEBI’s broader reform agenda may blur boundaries even more. Several PMS firms are now applying for AMC licenses, hinting at a more integrated asset management playbook in the future.
India’s new Specialised Investment Funds (SIFs) are emerging as a disruptor-in-waiting for the country’s high-end investment ecosystem, posing potential threats—though not yet existential—to Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).
With large mutual fund houses like Edelweiss and Quant receiving licenses to launch SIFs and others like Nippon and Axis awaiting approval, the conversation has shifted from regulatory structure to competitive overlap. Unlike PMS and AIFs, which cater to wealthy individuals with minimum investment thresholds of Rs 50 lakh and Rs 1 crore respectively, SIFs lower the bar to Rs 10 lakh—drawing in mass affluent investors who may be seeking more than just traditional mutual fund products.
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While industry experts downplay the idea of a full-blown shakeout, they agree that SIFs could pull assets from the lower end of the PMS and AIF spectrum. “SIFs are being seen as ‘mini PMS’ by some, but to me, they’re more like mega mutual funds,” said R Pallavarajan, Founder of PMS Bazaar. “Clients with Rs 10-Rs 50 lakh may consider them, but that’s a relatively small portion.”
PMS assets under management (AUM) stood at Rs 32 lakh crore (discretionary) as of April 2025, with non-discretionary AUM at Rs 3 lakh crore. Discretionary PMS (Portfolio Management Services) refers to a type of investment service where the portfolio manager has full authority to make investment decisions on behalf of the client, within the agreed mandate. This money includes what asset managers manage for the EPFO.
Non-Discretionary PMS, which refers to a portfolio management setup where the portfolio manager only advises or recommends investment decisions, but the client must approve each transaction before it is executed, has been a shrinking segment. This is the structure high networth individuals used to invest in, but lack of transparency has taken away the shine out of this product making way for AIFs.
AIFs, meanwhile, currently have Rs 13.49 lakh crore in commitments as of March, led by explosive growth in Category III funds—up 58.4% year-on-year.
Fund managers like Abhay Agarwal of Piper Serica believe that PMSs still have a distinct value proposition. “SIFs will appeal to a different segment—investors who want some complexity but not the fully curated or flexible structures PMSs offer,” he said. Agarwal sees SIFs more as a response to regulatory gaps and investor demand for long-short strategies within mutual funds.
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However, not everyone is reassured. An AIF CEO, who spoke on condition of anonymity, warned that poor performance by early SIFs could dent investor confidence across the board. “If they try to mimic derivative-based AIFs without the expertise, it risks damaging the entire ecosystem,” he said. There’s also concern about talent attrition, as AMCs look to hire seasoned fund managers with alternative strategy experience.
Taxation could tilt the balance further. SIFs have a clear advantage — changes within the underlying portfolio do not result in immediate tax liability for the investor which is the case for PMS. In simple terms, when a fund manager of a mutual fund buys and sells stocks, the fund does not pay any tax. The investors pays tax when he/she redeems the units, based on his capital gain/loss and the holding period of units. Ditto for SIFs. In a PMS, the investors pays the tax, after all, the stocks are held in his own account, so it is as if you are operating as a direct investor only.
Shweta Rajani, Head of Mutual Funds at Anand Rathi Wealth, believes AIFs are more at risk than PMSs. “Investors who wanted differentiated strategies had to go to AIFs with a Rs 1 crore minimum. Now, they can consider SIFs with just Rs 10 lakh,” she said.
While some AIFs are developing hybrid long-short products pending approvals, Category III AIFs already offer long-short equity. SIFs provide similar exposure with a lower minimum investment (Rs 10 lakh vs Rs 1 crore).
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In terms of strategies, SIFs can do everything that Category III AIFs can do — equity and debt long-short strategies, sectoral long-short positions, and other complex approaches beyond long-only equity. They are also permitted leverage of up to 25% of net assets in unhedged short positions unlike.
Still, not all segments are equally exposed. So while Category I and II which invest in start-ups, private equity and real estate etc may have something distinct to offer and thus will continue to hold their own, Category III might lose its distinctive proposition. Standardised PMS products may face more competition from SIFs, but highly personalised strategies will likely retain their niche. “The more tailored the portfolio, the less vulnerable it is,” said Sagar Lele of Paterson.
SEBI’s broader reform agenda may blur boundaries even more. Several PMS firms are now applying for AMC licenses, hinting at a more integrated asset management playbook in the future.
“This isn’t a turf war,” Agarwal added. “It’s an evolution in product design. SEBI is simply addressing a demand that’s long existed—more accessible, flexible alternatives for investors who want more than mutual funds but less than full-blown PMS or AIFs.”
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