Portfolio Management Service (PMS) is a professional financial service where skilled portfolio managers and stock market professionals manage your equity portfolio with the assistance of a research team. Many investors have equity portfolios in their Demat Account but managing them can be a challenge. PMS is a systematic approach to maximise returns while minimising the risk factor on your investments. It enables you to make sound decisions that are supported by extensive research and factual data without lifting a finger. Additionally, it better prepares you to deal with market adversity.

What are the types of portfolio management services?

There are four popular types of PMS which are explained in this section.

1. Active Portfolio Management: The portfolio manager's primary goal is to maximise returns. In the Active Portfolio Management method, the portfolio manager attempts to reduce the risk of your investments by diversifying them across asset classes, industries, and businesses. When compared to the passive style, this results in a higher turnover.
2. Passive Portfolio Management: This method focuses on fixed profiles that are in line with the current market trend. In this case, portfolio managers prefer to invest in index funds which grow passively over time with minimal intervention. They have a low turnover but offer reasonably good long-term returns.
3. Discretionary Portfolio Management: The portfolio manager is entrusted with managing a specific portfolio in this method. Based on your objectives, risk tolerance, and investment duration, the manager selects an appropriate strategy that they believe is best suited to your portfolio. For example, portfolio managers may recommend equity-oriented funds to a risk-taking investor and debt-oriented funds to a risk-averse investor.
4. Non-Discretionary Portfolio Management: In this method, the portfolio managers advise you on investing, but the final decision is yours. Once you give the go-ahead, the portfolio managers take the appropriate action on your behalf.

Alternative Investment Funds consist of investment funds pooled in together which is then used in investing private equity, hedge funds etc

Regulation 2(1)(b) of the  Regulation Act, 2012 of Securities and Exchange Board of India (SEBI) lays down the definition of AIFs. Through a company, or a Limited Liability Partnership (LLP) and Alternative Investment Fund can be established.

AIF does not include funds that are included in the regulations of the SEBI which oversee fund management activities. Other exemptions include family trusts, employee welfare trusts or gratuity trusts.

*Note: The SEBI granted further exemptions to AIFs on investment committee framework in January 2021. The exemption in AIF rule is conditional upon a capital commitment of at least Rs 70 crore from each investor accompanied by a suitable waiver.