SIFs vs PMS: Experts explain who should invest and who should stay away

Business Standard Smart Investor Arena 2026: Experts explained how specialised investment options differ and why investors should build a core portfolio first

Investors should build a basic portfolio of equity and fixed-income investments before considering specialised options such as Specialised Investment Funds (SIFs) and portfolio management services (PMS), experts said at the Business Standard Smart Investor Arena 2026. While these products offer strategies beyond conventional mutual funds, investors need to understand their risks and investment horizons before committing larger sums.

 

Speaking at a session titled SIFs vs PMS: The Next Level of Investing Options, Jyotivardhan Jaipuria, founder and chief executive officer of Valentis Advisors, and Rishi Kohli, chief investment officer at Jio BlackRock Mutual Fund, discussed how the two options differ and what investors should consider before choosing between them.

 

 

Both speakers cautioned against treating specialised products as the starting point for investing. Investors should first establish their basic equity and fixed-income allocation before considering strategies that seek to generate higher returns or manage risk differently.

 

SIFs offer strategies beyond conventional mutual funds

SIFs are a relatively new category within the mutual fund framework, with a minimum investment requirement of ₹10 lakh per asset management company (AMC). They can use strategies such as long-short investing and derivatives, allowing fund managers to take positions beyond conventional long-only investing.

 

Kohli said SIFs could help address the gap between equity and fixed-income investments by offering different combinations of risk and return.

 

“What is interesting from the SIF standpoint is that you had this big gap between equity and fixed income, where you didn't have anything at all in India,” he said. He added that the category offered investors more choices, but the suitability of a fund would ultimately depend on asset allocation and risk management.

 

Derivatives are another feature of some SIF strategies. Although retail investors can lose money trading futures and options, Kohli said their use by professional fund managers could serve different purposes, including hedging and enhancing returns.

 

“Derivatives can be used for many different things, and therefore, again, the objective and where it fits into your portfolio” need to be considered, he said.

 

However, investors should examine the strategy, leverage, transaction costs and potential losses before investing. Kohli also pointed out that the size of a fund's trades can affect execution costs and returns, limiting the scalability of some strategies.

 

PMS offers more concentrated stock selection

PMS can appeal to investors seeking a concentrated portfolio and a differentiated investment approach. Unlike a mutual fund, which pools investors' money into a common portfolio, PMS generally involves securities held directly in the client's account.

 

Jaipuria cautioned against entering PMS without prior experience of equity investing. He said investors should first understand how equity markets behave through conventional mutual funds.

 

“If this is your first foray into equities, don't come to a PMS,” he said. “At least get to mutual funds, get a feel for what the equity animal is, and only then come to PMSs.”

 

He explained that PMS portfolios could experience greater volatility because their managers may invest in smaller companies and hold concentrated positions. Investors who enter expecting quick gains could become discouraged during a poor year.

 

Jaipuria said his firm's clients should consider a longer investment horizon rather than expect immediate returns. “Think of us as a three-year, five-year horizon, not like a three-month horizon,” he said, adding that his firm discouraged investors looking to stay invested for only three months.

 

PMS can also offer greater visibility into individual holdings. Jaipuria said investors could see the stocks bought and sold, along with their respective prices, in their demat accounts. He also cited concentrated portfolios and access to fund managers as potential advantages.

 

However, concentration can magnify losses as well as gains. A PMS portfolio's performance depends on its investment decisions, and investors should not assume that a higher minimum investment guarantees superior returns.

 

Minimum investment is not the only consideration

SIFs have a minimum investment requirement of ₹10 lakh per AMC, subject to applicable rules. The minimum investment for conventional PMS is generally ₹50 lakh, although the regulatory framework and available structures can differ.

 

Kohli said the ₹10 lakh SIF threshold applies at the AMC level, rather than necessarily requiring a separate ₹10 lakh investment in every scheme. Investors should check the applicable rules and the fund house's offerings before deciding how to allocate their money.

 

Before investing, individuals should consider strategy, risk, costs & taxation, transparency, as well as Investment horizon

 

Jaipuria acknowledged the difference in the timing of tax payments between PMS and mutual funds. In PMS, investors may incur tax when securities are sold, whereas mutual fund investors generally pay capital gains tax when they redeem their units. The final tax outcome depends on the transactions, applicable tax rules and the investor's circumstances.

 

Build the core portfolio first

Both speakers emphasised that SIFs and PMS should not be the starting point for inexperienced investors. A basic allocation to equity and fixed-income investments should come first, with specialised strategies considered only when they serve a clear purpose in the portfolio.

 

Kohli said the allocation to SIFs would depend on an investor's risk tolerance, return objectives and existing holdings. He cautioned against assuming that one allocation would suit everyone.

 

Neither SIFs nor PMS can guarantee higher returns or protect investors from losses. The choice should depend on whether the investment strategy, costs, tax implications and potential volatility fit the investor's financial goals and investment horizon.