AIF vs PMS vs Mutual Fund FoF: Choosing a GIFT City Structure
By Anup Vatyani, AMFI-registered Mutual Fund Distributor (ARN 106715)
Updated
Once you've decided to invest through GIFT City, the next decision is which structure. The three most-compared options are the AIF (Alternative Investment Fund), PMS (Portfolio Management Services), and Mutual Fund FoF (Fund of Funds) — and the right choice usually comes down to ticket size, how hands-on you want to be, and how comfortable you are with liquidity constraints.
Mutual Fund FoF: simplicity at a lower ticket
A GIFT City Mutual Fund FoF is a feeder structure — your money channels into an underlying scheme, much like a fund-of-funds works domestically. Entry tickets are the lowest of the three (from USD 500 for some funds, though this varies by fund house), pooled and professionally managed with no ongoing decision-making required from you. This is generally the most accessible structure for an investor new to GIFT City.
AIF: for less standardised, higher-conviction strategies
An AIF is a pooled vehicle built for strategies that don't fit neatly into a mutual fund wrapper — concentrated equity bets, credit strategies, structured products. Entry tickets are meaningfully higher (commonly from around $150,000, with some exceptions), and liquidity terms are usually less flexible, with lock-in periods common. AIFs suit investors who specifically want exposure to the strategy's differentiation, not just diversified market exposure.
PMS: customisation and discretion
Portfolio Management Services give you an individually held portfolio managed to a mandate, rather than pooled units in a fund. Minimum tickets typically start around $75,000. PMS suits investors who want more visibility into and influence over their actual holdings, and who are comfortable with a more concentrated, discretionary approach than a pooled fund offers.
How to actually decide
Start with your ticket size — it often narrows the choice on its own. Then weigh how much you want a diversified, hands-off structure (FoF) against wanting a specific strategy (AIF) or individual portfolio customisation (PMS). Liquidity terms differ meaningfully across all three, so always confirm redemption terms and lock-ins with the specific FME before committing.
See the full comparison table with ticket sizes and investor fit on our Funds Explained page, or talk to Anup about which structure suits your situation.
The three structures compared
| Mutual Fund FoF / feeder | PMS | AIF | |
|---|---|---|---|
| Typical minimum | From USD 500 for some funds | USD 75,000 | Commonly USD 150,000 |
| What you own | Units of a pooled fund | The securities themselves | Units of a pooled fund |
| Liquidity | Usually regular redemptions | Withdraw on notice | Often lock-ins or close-ended terms |
| Costs | Fund expenses plus underlying fund | Management fee, often a performance fee | Management fee, often a performance fee |
| Your involvement | None after investing | Mandate set with the manager | None after committing |
| Tax paperwork | One holding | Each security | One holding, sometimes complex statements |
Typical minimum investment, USD
- FoF / feeder (lowest seen)500
- PMS75,000
- AIF (restricted scheme)150,000
A simple way to narrow it down
- 1
Under USD 75,000?
Retail funds and feeders
- 2
USD 75,000 to 150,000?
PMS becomes possible
- 3
Over USD 150,000?
AIFs become possible
- 4
Need access to the money?
Avoid long lock-ins
Two examples
- A UAE-based NRI with USD 20,000 wanting Indian equity exposure in dollars will mostly be looking at retail inbound funds or feeders.
- A family with USD 500,000 might split between a diversified fund and one AIF strategy, accepting the AIF's lock-in for part of the money only.
Each structure has its own page: feeder funds, PMS and AIFs. All minimums are in one table on minimum investment amounts.
Understanding the costs
Costs differ more than people expect. A feeder fund charges its own expenses and also bears the costs of the fund it invests in, so ask for the total. PMS and AIFs usually charge a yearly management fee and often a performance fee: a share of returns above a hurdle. A performance fee can be fair, but read how it is calculated, whether there is a high-water mark, and whether it is charged on realised or unrealised gains.
Questions to ask before you choose
- What is the total yearly cost, including any underlying fund and performance fee?
- How and when can I take money out, and what does it cost to leave early?
- Who holds the assets (the custodian), and how often is the portfolio valued?
- Does the scheme accept investors from my country and residential status?
- What statements will I get for tax filing in India and where I live?
Ticket sizes and terms are indicative and vary by Fund Management Entity. This article is educational only and is not investment advice.