SIF vs PMS vs AIF: Where a Specialized Investment Fund Fits

SIF vs PMS vs AIF is a choice between three SEBI-regulated ways of having a professional manager run money beyond an ordinary mutual fund. A Specialized Investment Fund (SIF) needs ₹10 lakh, a Portfolio Management Service (PMS) ₹50 lakh and an Alternative Investment Fund (AIF) ₹1 crore. Yet what you own, what the manager may do, how you get out and when tax falls due separate the three far more than the minimum, and they are not rungs on a ladder every portfolio must climb. This comparison reflects the rules as of October 2026.

New to SIFs? Start with what a Specialized Investment Fund is and how it works.

SIF vs PMS vs AIF at a glance

Minimum ticket: SIF ₹10 lakh vs PMS ₹50 lakh vs AIF ₹1 crore

SIF. SEBI's SIF rules, introduced by its circular of 27 February 2025 and now carried under the SEBI (Mutual Funds) Regulations, 2026, require at least ₹10 lakh per investor, counted at PAN level across all strategies of one SIF. Your ordinary mutual fund holdings with the same fund house do not count. SIP, STP and SWP are allowed while the total stays at or above ₹10 lakh. If a market fall alone takes you below it, that is not a breach, but you may then only redeem the whole remaining amount.

PMS. The SEBI (Portfolio Managers) Regulations, 2020 bar a manager from accepting less than ₹50 lakh in funds, securities or both from a client.

AIF. The SEBI (Alternative Investment Funds) Regulations, 2012 set ₹1 crore per investor, or ₹25 lakh for employees and directors of the fund or its manager.

Until 31 March 2027, then, a SIF is the only one of the three open to most investors below ₹50 lakh, which is why it is often weighed as an alternative to PMS.

Accredited investors

All three rulebooks waive the minimum for an accredited investor; for a PMS, subject to disclosures and agreed terms. An individual qualifies through a certificate from an accreditation agency, for example with annual income of ₹2 crore or more, or net worth of ₹7.5 crore or more with at least ₹3.75 crore in financial assets.

Structure: pooled units, your own securities or a private pool

A SIF is run by a mutual fund house under a separate brand. You hold units bought and redeemed at NAV, not the shares behind them.

A PMS builds a separate portfolio for you. The securities sit in a demat account in your name, never the manager's. A discretionary manager decides what to buy and sell; a non-discretionary manager acts on your directions, so you approve each trade.

An AIF is a privately pooled vehicle, set up as a trust, company or LLP, that issues you units. In Category I and II funds you usually commit a sum that the manager draws in instalments as it finds investments.

What each may do: shorts, derivatives and leverage

SIF. A strategy may take unhedged short exposure through exchange-traded derivatives of up to 25% of net assets. Gross exposure may not exceed 100% of net assets, so a SIF cannot use leverage to magnify its bets. SEBI permits seven strategies; on 9 October 2026, all 34 live SIF strategies were equity or hybrid.

PMS. A manager may use exchange-traded derivatives on terms in your agreement, but your derivative exposure may not exceed the money you placed, and the manager may not borrow on your behalf. In practice, PMS strategies are typically long-only portfolios of listed shares.

AIF. A Category III fund may use leverage, including through derivatives, of up to 2 times NAV after offsetting hedges, a limit set by SEBI's circular of 29 July 2013. Category I and II funds may not borrow except for temporary funding needs.

Our comparison of Category III long-short AIFs, SIFs and PMS goes deeper.

SIF liquidity vs AIF and PMS: how you get out

SIF. SEBI's SIF framework sets redemption at daily for equity strategies, twice a week for hybrid and once a week for debt, or less often if the fund house so decides; each strategy's documents set its actual frequency. Hybrid and debt strategies are interval structures with exchange-listed units. A notice period of up to 15 working days is allowed. SEBI sets no lock-in period, but the redemption frequency, notice period and any exit load in the strategy's documents decide how quickly you can get out.

PMS. You can withdraw part or all of your portfolio. SEBI caps the exit load at 3% of the amount redeemed in the first year, 2% in the second and 1% in the third, and nil after that.

AIF. Category I and II funds are close-ended with a minimum tenure of three years, extendable by up to two years with two-thirds approval of unit holders by value. Close-ended units may be listed, but only in lots of at least ₹1 crore, so leaving early is rarely simple. Category III funds may be open-ended or close-ended; an open-ended one redeems at the intervals its placement memorandum sets.

How are SIF, PMS and AIF taxed in FY 2026-27?

The Income-tax Act, 2025 has applied since 1 April 2026. The rates below are for FY 2026-27, with surcharge and 4% cess on top.

SIF: taxed like mutual fund units

Trades inside the fund are not your taxable events; you pay when you redeem, switch or transfer units. For an equity-oriented strategy (at least 65% in listed domestic equity), gains within 12 months are taxed at 20%, and longer-held gains at 12.5% on the amount above ₹1.25 lakh a year. A debt-oriented strategy (more than 65% in debt and money market instruments) is taxed at your slab rate however long you hold. See SIF taxation for equity, debt and hybrid strategies for the cases in between.

PMS: taxed on every sale

Every sale the manager makes in your demat account is your capital gain, at the same listed-equity rates of 20% and 12.5%; dividends are taxed at your slab rate. A high-turnover strategy can create a tax bill in a year you withdraw nothing.

AIF: pass-through or fund level

Category I and II funds are pass-through: income other than business income is taxed in your hands with its original character, under the pass-through rules for investment funds (Section 115UB of the 1961 Act, carried into the Income-tax Act, 2025), in the year the fund earns it, even if nothing is paid out. The fund deducts 10% TDS on income distributed to resident investors (Section 194LBB of the 1961 Act, now Section 393). Category III funds are taxed at the fund level, at rates that depend on the type of income, such as capital gains or business income, and on how the fund is set up, and you receive returns after that tax.

Confirm your own position with a chartered accountant.

How often do SIF, PMS and AIF report to you?

SIF. A NAV every business day; the full portfolio, derivatives included, every alternate month, within 10 days; a five-level risk band reviewed monthly; and an Investment Strategy Information Document (ISID) with a scenario analysis of possible losses.

PMS. The most direct view, because every holding sits in your own demat account. The regulations require a full report at least every three months, and SEBI's master circular a statement of your funds account at least monthly. Performance is reported against a benchmark chosen from those APMI prescribes under SEBI's circular of 16 December 2022.

AIF. Fund-level reporting under the private placement memorandum. A Category III fund discloses NAV at least monthly if open-ended or quarterly if close-ended, and reports to investors quarterly. Category I and II funds are valued independently at least every six months and report at least annually.

Who regulates SIF, PMS and AIF?

SEBI regulates all three under the rulebooks named above. The SIF framework, introduced by its circular of 27 February 2025 and effective 1 April 2025, has sat in the SEBI (Mutual Funds) Regulations, 2026 since 1 April 2026. In October 2026 SEBI notified the SEBI (Portfolio Managers) Regulations, 2026, effective 1 April 2027, which keep the ₹50 lakh minimum and add PRIM, a PMS route investing only in direct plans of mutual funds, including SIFs, from ₹25 lakh. The AIF regulations were last amended on 14 July 2026.

Check any manager's registration on SEBI's website; APMI also publishes portfolio manager data.

What do SIF, PMS and AIF cost?

SIF. One total expense ratio is taken out of the NAV, as with a mutual fund, in Direct and Regular plans.

PMS. The fee can be fixed, performance-linked or a mix, with no upfront fee allowed. A performance fee applies above a hurdle rate and only on gains above the previous high-water mark, charged no more often than quarterly. Other operating expenses, excluding brokerage, are capped at 0.50% a year of average daily assets, and 18% GST applies to the fees.

AIF. A management fee and, in many funds, carried interest above a hurdle, set out in the placement memorandum, with 18% GST on management fees.

SIF, PMS or AIF: how do you tell which fits?

None of the three is better in general; each fits a different job, and the choice stays with you.

• A SIF can fit someone with at least ₹10 lakh who wants a pooled strategy that may short within limits, is comfortable with the strategy's redemption schedule and with tax only on redemption, and accepts that a long-short strategy can lose money, including on its short positions.
• A PMS can fit someone with ₹50 lakh or more who wants to own and see each stock, and accepts tax on every sale and fees that carry 18% GST.
• An AIF can fit someone with ₹1 crore or more who wants private equity, private credit or real estate through Category I or II and can leave money untouched for years, or a leveraged long-short strategy through Category III.

Not rungs on a ladder

SEBI's own SIF circular describes the rulebooks as progressively more flexible from mutual funds to PMS to AIFs. That describes regulation, not a path you must climb: an investor may hold mutual funds and a SIF and never need the others. What matters is each rupee's job, how soon you may need it and how much strategy risk you will carry. Shorting does not remove risk from a SIF; it changes its shape.

How Sanriya works with SIF investors

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). For a SIF we explain how the strategy, its redemption frequency and its risk band work, handle the KYC and application paperwork, and service the investment afterwards, including SIPs, switches and redemptions. The decision stays with you. We distribute under the Regular plan and are paid commission by the fund house, so you pay us no separate fee. To see how a SIF works and what the paperwork involves, read our SIF page or contact us.