AIF Category III vs PMS: Which Alternative Investment Strategy Fits Your ₹1 Crore+ Portfolio?

Friday, Aug 15, 2025

Cracking the ₹1 Crore Code

Making it to a ₹1 crore milestone in your investing journey has a silent force of its own. This is not a figure, this is an interface. When you get here, you do not play the retail game anymore. Your capital is primed to enter the world of alternative investments-the big leagues where money does not grow but compounds strategically.

The era when it was only sufficient to know the mutual funds, the real estate, and public equities to create real wealth is left far behind. Today, as an investor, you are looking at investments beyond the traditional value that only CXOs, successful entrepreneurs, NRIs, and seasoned pros may offer.

The two investment vehicles that bust the Indian high-net-worth scenario at this crossroad include:

Portfolio Management Services (PMS)
Alternative Investment Funds (AIF), especially Category III

We provide both at Green Portfolio. We do not believe in a universal answer. In this blog, we will take an unbiased, head-to-head walkthrough of PMS vs AIF Category III, so that you can choose one that best suits your investment objective, risk and investment personality.

How about we crack this code?

Decoding the Alternatives – AIF & PMS in Simple Language

What is an Alternative Investment Fund (AIF)?

An Alternative Investment Fund (AIF) refers to a privately pooled investment vehicle that is established in India through SEBI regulations. The AIFs are highly risky funds that target sophisticated investors wishing to receive returns that are above the availability of traditional mutual funds and fixed-income securities.

So, what are AIF funds, exactly?

Unlike mutual funds—which invest mainly in listed equities and bonds - AIFs can invest in:

Unlisted companies
Pre-IPO opportunities
Hedge-fund-like strategies
Derivatives and structured products

There are three types of AIF in India:

Category I AIFs – Focused on sectors like startups, infrastructure, and social ventures.
Category II AIFs – PE funds, real estate funds, and debt funds.
Category III AIFs – Long-short equity funds, hedge strategies, and high-return plays.

What is AIF investment?
It’s a smart way to access complex, high-growth opportunities that retail investors can’t reach. Investors in AIF Category III often benefit from pre-IPO allocations, preferential allotments, and founder-backed private rounds.

What are AIF investments great for?
Diversification, alpha generation, and participation in India’s evolving private capital markets.

What is PMS in Investment?

Portfolio Management Services (PMS) offer personalized investment strategies managed by expert fund managers on your behalf. Here, your capital is directly invested in a curated basket of listed equities, and you own the stocks in your name.

If mutual funds are for the masses, PMS is for the sophisticated individual investor who desires:

Control
Transparency
Tailored equity exposure
Higher risk-adjusted returns

What is PMS investing?
PMS allows you to create concentrated or diversified equity portfolios based on your financial goals, managed by professionals with a proven track record.

Minimum investment for PMS is ₹50 lakhs (as per SEBI norms), making it suitable for high-income professionals, HNIs, and business owners.

AIF vs PMS – The Key Differences You Need to Know

Feature	PMS	AIF Category III
Regulated by	SEBI	SEBI
Ownership	Direct ownership of stocks	Investment in fund units
Minimum Investment	₹50 Lakhs	₹1 Crore
Taxation	In the hands of investor	Taxed at fund level
Liquidity	Usually high	Lock-in period varies (typically 3+ years)
Leverage	Not allowed	Permitted within SEBI limits
Transparency	Full stock-level portfolio visibility	Periodic NAV and fund disclosures
Access to Profitable Deals	Limited	High (Pre-IPO, preferential rounds, etc.)

What is the difference between PMS and AIF?
The core difference lies in structure, taxation, and flexibility. PMS is ideal for those who want direct market exposure, while AIF Category III offers a pooled approach with potential access to exclusive investment opportunities.

Difference between AIF and mutual fund?
AIFs can invest in private equity, unlisted shares, and alternative asset classes. Mutual funds are more regulated and conservative, limited to listed instruments.

Who Can Invest? Entry Barriers & Eligibility

Who is Eligible to Invest in PMS and AIF?

For PMS:

Individuals with minimum ₹50 lakhs to invest
Moderate to high investment experience
Interested in owning stocks directly
Desires a customizable strategy

For AIF Category III:

Accredited investors with at least ₹1 crore to invest
Comfortable with less liquidity
Looking for Pre-IPO, preferential, or high-growth private deals
Long-term vision (3–5 years)

Who can invest in an AIF in India?
HNIs, NRIs, family offices, institutional investors, and qualified corporate entities.

How to invest in AIF in India?
Through SEBI-registered AIF managers like Green Portfolio, post due diligence, and signing of Private Placement Memorandum (PPM). AIF investments are offered via fund units, unlike PMS.

How to start an alternative investment fund in India?
Starting an AIF involves SEBI registration, setting up a trust/LLP, hiring a fund manager, and adhering to investment strategy disclosures. This is typically done by licensed fund houses like ours.

Strategy Styles – How PMS and AIF Approach Wealth Creation Differently

Green Portfolio’s PMS Approach

At Green Portfolio, our PMS offerings span diverse investor goals:

Special Fund – Long-term, multibagger stock picking with GARP principles
Super 30 Fund – Aggressive turnaround bets and special situations
Dividend Yield Fund – High-quality companies offering regular payouts
MNC Advantage Fund – Stocks of global giants with Indian footprints
Impact ESG Fund – ESG-focused high-growth picks with real-world impact

These PMS strategies are ideal for investors who want transparency, control, and a fundamental equity-led approach.

Green Portfolio’s AIF Strategy: India Infinite Fund (Category III)

Our Category III AIF, the India Infinite Fund, is built for those who want access to high-conviction, unlisted and private market opportunities.

We invest in:

Pre-IPO rounds
Preferential allotments
Founder-led growth rounds
Niche private companies

Sector Focus:

Medical Devices
Telecom Equipment
Cables & Wires
Specialty Chemicals
Niche Tech (robotics, AI-enabled manufacturing)

What sets our AIF apart?

Rigorous screening and due diligence
Valuation cushion of 200–300% upside
Long-term vision (10–20 years business view)
Tax-efficient returns (taxed at fund level)

Which AIF is best in India?
If you’re looking for a diversified, high-growth, tax-efficient fund with exposure to both public and private markets - Green Portfolio’s India Infinite Fund ranks among the top AIF funds in India for forward-looking HNIs.

Risk Appetite & Control – Who’s in the Driver’s Seat?

When it comes to your ₹1 crore+ portfolio, understanding who controls your money and how risk is managed is critical. This is where the difference between AIF and PMS becomes crystal clear.

PMS: Control, Visibility & Customization

If you're someone who likes to know exactly which stocks you own, track performance regularly, and even influence sector exposure, Portfolio Management Services (PMS) might feel like home.

Direct ownership of securities — you hold the stocks in your name.
Customized strategies — tailor-made portfolios based on your goals.
Complete transparency — you know exactly what you're holding at all times.
No leverage — making it relatively more stable.

PMS investing suits those who prefer transparency and active involvement. Many HNIs appreciate the sense of control this gives them—especially when legacy wealth is involved.

But with great control comes great responsibility. Your portfolio’s tax burden, volatility, and execution risk all sit on your personal books.

AIF Category III: Strategic Delegation & Sophistication

If you're comfortable with ceding control in exchange for accessing high-potential, often under-the-radar opportunities, then AIF Category III might be your route.

Pooled investment structure — you're investing in a fund, not individual stocks.
Leverage allowed (within SEBI limits) — amplifying returns, but also increasing risk.
No day-to-day micromanagement — the fund manager handles the execution.
Lower liquidity — funds typically have a lock-in period of 3–5 years.

What is an alternative investment fund manager supposed to do?
Their job is to identify long-term, high-conviction bets across public and private markets and manage risk using both qualitative (promoter quality, governance) and quantitative (valuation cushion, debt/equity ratios) filters.

While you won't see stock-level visibility daily, you’ll get quarterly performance reports and updates on your fund's strategic moves.

Taxation – What Really Stays With You?

This is where Category III AIFs show one of their strongest advantages—simplified taxation.

PMS Taxation

Under PMS, since you directly own the stocks, all gains are taxed in your hands.

Short-Term Capital Gains (STCG) – 15%
Long-Term Capital Gains (LTCG) – 10% (above ₹1 lakh annually)
Dividends – Taxed as per your personal slab

This means frequent churn or aggressive strategies could create unexpected tax events, impacting your real returns.

PMS in investment offers portfolio flexibility, but with higher tax-reporting responsibility.

AIF Cat III Taxation: Tax at Fund Level

This is one of the best alternative investment fund structures for HNIs seeking tax simplicity.

Tax is paid at the fund level.
You receive post-tax returns—clean and simple.
No capital gain entries, dividend entries, or audit headaches until exit.

This pass-through tax mechanism makes Category III AIFs very attractive for investors who prefer minimal compliance burden.

How to invest in AIF in India?
You invest via units in a SEBI-registered AIF like Green Portfolio. Tax is managed by the fund manager. You simply track NAV and wait for capital appreciation.

Decision Map – What Kind of Investor Are You?

Still wondering which route is better?

Here’s a practical framework to guide your decision.

Investor Archetype

Investor Profile	Best Fit: PMS	Best Fit: AIF Category III
Wants complete control & clarity	Full visibility, direct stock ownership	Pooled vehicle, limited transparency
Prioritizes tax simplicity	You file tax on gains	Taxed at fund level
Likes Pre-IPO/Private deals	Rare or indirect access	Direct participation in exclusive opportunities
Prefers liquidity	Can redeem as needed	Lock-in of 3–5 years typical
Focused on long-term alpha	With active management	With leverage and private exposure
Conscious about ESG investing	Impact ESG Fund available	Less structured ESG focus (varies by fund)
Wants diversification beyond equities	Purely equity-based	Includes private equity and hybrid assets

Green Portfolio’s Edge – Powering Both PMS & AIF

Whether you're leaning towards the transparency of PMS or the exclusivity of AIF, Green Portfolio brings the best of both worlds:

Our PMS Offerings:

Super 30 Fund – Turnaround businesses, high-reward potential
Dividend Yield Fund – Income + capital growth from steady giants
Special Fund – GARP-based multi-bagger strategies
MNC Advantage Fund – Global brands with India presence
Impact ESG Fund – Companies that walk the ESG talk

Each strategy is backed by:

Deep-dive research
Quarterly reporting
Risk-managed stock picking
Direct ownership and execution transparency

Our Flagship AIF: India Infinite Fund (Category III)

A truly differentiated AIF for investors looking to capture value across private and public sectors.

Why It Stands Out:

Access to Pre-IPO, preferential, and founder-led growth rounds
Focus on Medical Devices, Telecom, Specialty Chemicals, EV Infra, and more
Up to 300% upside filters—we only invest when the risk-reward is highly skewed in your favor
Emphasis on audit transparency, promoter integrity, and succession clarity

Top alternative investment funds in India increasingly look like this—visionary, sector-agnostic, and run by battle-tested fund managers.

Best AIF funds in India give you something that PMS can’t: access to deals before they become mainstream.

Questions You Should Ask Yourself

Before choosing between PMS and AIF, ask yourself:

Do I want complete visibility into my portfolio or am I okay with pooled reports?
Am I fine locking in funds for 3–5 years for potentially higher alpha?
How important is tax simplicity for me?
Am I looking for exclusive private market exposure?
Do I prefer a direct equity approach or a fund-style delegation?

If your answers favor transparency, liquidity, and control, PMS might be your path.
If your answers lean toward long-term alpha, tax efficiency, and access to private deals, AIF Category III is likely your best fit.

It’s Not Either–Or. It’s Strategic Allocation.

Your ₹1 crore+ portfolio doesn’t need to make a binary choice between PMS and AIF. In fact, many savvy investors combine both to diversify returns, manage taxes, and gain exposure across different risk profiles.

At Green Portfolio, we help you craft that balanced approach:

Build a solid core with PMS—transparent, personalized, and equity-driven.
Add a high-conviction satellite through AIF Category III—future-ready, tax-optimized, and exclusive.

We don’t chase the market - we back businesses. Whether it's through PMS or AIF, your capital works with a purpose.

Let’s Talk Strategy

Ready to elevate your investment approach?

Book a Consultation with our AIF & PMS specialists at Green Portfolio.
Discover how we can grow your wealth with intelligence, integrity, and impact.

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