Understanding PMS, AIF & Equity Opportunities — Kamal Manocha Explains The Road To Smarter, Bigger Wealth Creation

In the latest episode of The Simple Hai! show, veteran journalist Vivek Law spoke with Kamal Manocha, the founder and CEO of PMS AIF World, an investment services platform specialising in Portfolio Management Services (PMS) and Alternate Investment Funds (AIF).

Manocha explained the nuances of PMS and AIF investing, the risks and rewards associated with each, and why India’s current market environment presented a once-in-a-decade opportunity for wealth creation.

The conversation was rich with insights into investor behaviour, structural differences between investment options, and the habits that set successful investors apart. Throughout the discussion, Manocha emphasised education, discipline and long-term thinking as the cornerstones of financial success.

The Golden Era of Investing in India

Manocha opened the discussion by describing the Indian equity markets as being on the cusp of a “golden era,” with the next five to 10 years presenting unprecedented opportunities for wealth creation. He pointed out that despite the availability of multiple investment avenues, mutual funds, PMS, AIFs, direct stocks, and even unlisted companies, equity penetration in India remained relatively low. For many investors, equities were still synonymous with high risk.

Manocha also shared the importance of consistency and patience. He noted that investors who demanded steadiness could achieve 15-16 % returns through mutual funds, which, when compounded over decades, created substantial wealth. He remarked, “If you are demanding consistency, it is okay to invest in mutual funds... You can make around 15-16% in mutual funds.” He said the key was not only compounding but also continuous learning and education to stay aligned with investment goals.

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PMS vs. AIF: Key Structural Differences

Law then asked Manocha to clarify the distinction between PMS and AIF, two terms often used interchangeably by investors but fundamentally different in structure.

Manocha explained:

• Portfolio Management Services (PMS): A personalised service where an expert manages an investor’s Demat account in line with their objectives. Investors retain direct ownership of the stocks held, and transparency is much higher compared to mutual funds. PMS portfolios typically focus on listed equities.

• Alternate Investment Funds (AIF): A pooled investment structure where money is collected from multiple investors and deployed into alternative assets such as unlisted equities, infrastructure projects, and commodities. Unlike PMS, investors do not directly own the underlying securities but rather hold units of the fund.

Manocha drew a sharp distinction by stating, “PMS is a personalised Demat account; you are the shareholder of each company being held.” By contrast, AIFs resembled mutual funds in their collective nature, though they invested in asset classes beyond the scope of mutual funds.

Discretionary vs. Non-Discretionary PMS

Law moved the conversation to the operational models of PMS. Manocha explained that PMS operated under two models:

• Discretionary PMS: Portfolio managers made investment decisions independently, guided by the investor’s objectives.

• Non-Discretionary PMS: Decisions were made in consultation with the investor, giving them more control over individual stock picks.

Manocha emphasised that one of the major advantages of PMS over mutual funds was transparency and communication. During volatile phases such as the market fall during the Covid-19 pandemic, PMS investors could directly consult portfolio managers, gaining valuable insights and reassurance, whereas mutual fund investors were limited to periodic fact sheets and general communication.

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Returns and Risk: A Balanced View

Law asked Manocha about how PMS compares with mutual funds in terms of risk and returns. Manocha responded by reframing the common perception of equity as inherently risky. He argued that the focus should not be on avoiding risk but on managing it.

He explained:

• PMS portfolios, being concentrated and actively managed, tended to have higher volatility but also greater potential for outsized returns.

• Mutual funds, with their broad diversification, offered more consistent returns and lower volatility, making them suitable for risk-averse investors.

• PMS investors, with access to detailed information and direct communication, could act more strategically during market corrections, potentially improving long-term outcomes.

He summed it up by saying, “If you want higher returns, obviously you have to educate yourself and understand that... you will be able to appreciate the outcomes of investing in PMS and AIF.”

PMS: The Middle Ground Between Mutual Funds and Direct Stocks

Law asked if PMS might serve as a bridge between the simplicity of mutual funds and the complexity of direct stock investing. Manocha agreed, calling PMS “a right medium” for investors seeking both higher returns and greater financial literacy.

He explained that PMS platforms often provided personalised communication through webinars, newsletters, and consultations, which kept investors informed and empowered. This education, he said, played a key role in helping investors manage behavioural challenges like fear during downturns or greed during rallies.

Investor Suitability and Minimum Investment Levels

The discussion then shifted to the suitability of PMS and AIF for different investor profiles. Manocha explained that mutual funds were ideal for beginners with limited capital, while PMS and AIF were better suited to wealthy individuals with higher risk tolerance.

He shared practical guidelines:

• PMS portfolios were appropriate for investors with at least Rs 2.5–3 crore in equity capital.

• No single PMS should account for more than 20 percent of an investor’s equity portfolio.

According to Manocha, the most suitable candidates for PMS and AIF were investors in their mid-30s to early 40s who had already accumulated substantial wealth and were ready to explore higher-return avenues.

Understanding the Categories of AIF

Manocha then offered a detailed breakdown of the three categories of AIFs defined by SEBI:

• Category I: Focused on early-stage opportunities such as deep-tech startups.

• Category II: Targeted mid-stage companies, including pre-IPO opportunities.

• Category III: Invested in listed instruments with the ability to use leverage, hedging, and derivatives.

He explained that AIFs gave investors access to opportunities beyond mutual funds, such as solar power projects, infrastructure, and real estate. For instance, investing in renewable energy projects through AIFs could create alternative income streams and diversify portfolios.

However, he cautioned against investing directly in unlisted equities, describing it as “highly risky.” Structured vehicles like AIFs, he said, provided the expertise and governance needed to manage such risks, especially for investors with portfolios exceeding Rs 7.5–10 crore.

Trends Among High Net-Worth Individuals

When Law asked about current investment behaviour among HNIs, Manocha stated a clear divide. While many wealthy investors preferred consistency and remained loyal to mutual funds, a growing number were actively seeking “alpha” returns above benchmark performance and were therefore drawn to PMS and AIF.

He highlighted that successful investors were those who valued expertise and made decisions based on objective performance rather than brand names. “They are confident, they know that they need experts, and they choose funds and managers based on objective alpha creation rather than brand names,” he said.

The Wealth Creation Habits of Successful Investors

Manocha shared several insights into the mindset of India’s most successful investors:

• They acknowledged their limitations and relied on experts rather than attempting to manage portfolios themselves.

• They focused on long-term wealth creation, avoiding the lure of short-term speculation.

• They cultivated patience and discipline, refusing to be swayed by market noise.

• They continuously reviewed their portfolios and sought improvements in consultation with trusted advisors.

He stressed that education and guidance helped investors stay the course during turbulent periods, preventing them from making impulsive or emotional decisions.

The Vision for PMS AIF World

In conclusion, Law asked Manocha about his long-term vision for PMS AIF World. Manocha explained that his mission was to create real wealth creation stories by combining professional expertise with investor education. His objectives included:

• Educating investors about asset allocation and equity investing.

• Demystifying complex investment structures such as PMS and AIF.

• Providing continuous communication through webinars, newsletters, and consultations.

• Helping investors align expectations with reality and achieve financial happiness.

He concluded by calling the current Indian equity market a “once-in-a-decade opportunity” and emphasised that disciplined, educated investing would lead to transformational wealth creation.