Understanding the Comparison: Separately Managed Accounts and PMS

Specialised Investment Funds: A Nuanced Approach to Advanced Investment Strategies

Specialised Investment Funds (SIFs) are increasingly being promoted as a middle ground for investors seeking more than traditional mutual funds but not ready for the higher ticket size and complexity of Portfolio Management Services (PMS). The idea behind SIFs is to offer advanced investment strategies in a more accessible and regulated format. However, experts say the reality is more complex than the often-used label of "PMS-lite."

SIFs aim to make sophisticated investment strategies, such as long-short equity and dynamic hedging, accessible to a broader set of investors while remaining within a regulated mutual fund structure. They combine advanced research and active management with rules that ensure transparency and standard taxation.

A Clear Comparison

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SIFs differ from PMS in both strategy and investment size. Typically, the minimum investment for SIFs is around Rs 10 lakh, compared to Rs 50 lakh for PMS. However, SIFs pool investor money, unlike PMS, where portfolios are managed separately for each individual. This means SIFs cannot offer the same level of personalisation or highly concentrated bets that PMS can provide.

Industry Insights

Industry experts caution that the "PMS-lite" tag is often more of a marketing phrase than a technical reality. "Typically, the 'PMS-lite' positioning is more about sales narrative for the Rs 10– Rs 50 lakh client segment; the regulatory and fiduciary realities remain closer to MFs than to discretionary PMS," said Nitin Agrawal, CEO, Mutual Funds, InCred Money.

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SIFs follow a mutual fund-like framework under the Securities and Exchange Board of India (Sebi), bringing more standardisation and oversight. PMS, on the other hand, offers customised portfolios in which securities are held directly in the investor's name, with greater flexibility but less uniformity.

Key Distinctions

SIFs and PMS also differ in how strategies are executed and risk management is handled. SIFs can use a mix of approaches such as long, short, arbitrage, and dynamic allocation, while PMS strategies are often long-only and do not actively use shorting or arbitrage. Risk management also works differently, with SIFs actively adjusting their exposure based on market conditions like valuations, volatility, or macro signals.

Conclusion

For investors, SIFs are meant for those who have moved beyond basic mutual funds but do not want or cannot commit to the scale of PMS investments. Industry experts agree that SIFs are a distinct investment category built for an entirely different investor need. "The SEBI-regulated SIF framework allows for greater flexibility, institutional-grade risk management, and outcome-oriented strategies, while retaining the governance and taxation efficiencies of mutual funds," said Raghav Iyengar, CEO, 360 ONE Asset Management Ltd.