Rs 100 lakh cr by 2030: PMS, AIFs are next big bet for wealthy investors

These investment vehicles are increasingly seen as essential tools for high-net-worth individuals and ultra-high-net-worth individuals looking to achieve superior returns, greater diversification

Entering a new phase of growth, assets managed by the Indian alternative investment industry, comprising Portfolio Management Services (PMSes) and Alternative Investment Funds (AIFs), is set to cross Rs 100 lakh crore mark by 2030, as per a study by PMS Bazaar.  To give you some perspective, that’s more than five times the current value in just 6 years.

 

But what are these alternative options? 

1. Portfolio Management Services (PMS)

Imagine you have a decent amount of money to invest, but you’re not sure how to manage it or pick the best investments yourself. That’s where PMS comes in.

 

 

A Portfolio Manager is a professional who handles your investments on your behalf. They look at things like stocks, bonds, and other assets, and create a custom investment plan based on your goals, risk tolerance, and time horizon.

 

For example, if you want to invest in the stock market but don’t have the time or expertise to research individual stocks, a PMS will take care of all that for you. They do the research, make decisions, and monitor your investments to help your wealth grow.

 

Key point: PMS offers a personalized, hands-on approach to managing your money with a focus on higher returns, but it’s typically for investors with more substantial capital (usually starting from Rs 50 lakh and up).

 

2. Alternative Investment Funds (AIF)

Now, let’s talk about AIFs. These are a bit different. An AIF is a pool of money from multiple investors, managed by a fund manager, and invested in alternative assets—things that aren't the usual stocks or bonds.

 

These “alternative assets” could include private equity, real estate, venture capital, hedge funds, or even startups. The idea is to invest in areas that might offer higher returns but also come with more risk or complexity.

 

For example, if you want to invest in a startup but don’t want to deal with all the risks of individual investments, an AIF lets you pool your money with others and invest in these high-potential opportunities, managed by experts.  33% growth in last 10 years

 

In the last decade (from FY14 to FY25), the PMS and AIF markets have been growing at a rate of 33% per year. As of now, in FY25, they’re managing a combined total of Rs 18.87 lakh crore, split between PMSes (around Rs 7 lakh crore) and AIFs (around Rs 12 lakh crore). A lot of this growth is coming from Category-II AIFs, which hold the biggest chunk.

 

So, why are these investment options becoming so hot right now? It's mainly due to:

 

• Rising wealth: More people in India are getting richer, and with that comes a desire for smarter, better ways to invest.
• Better understanding of finances: Financial literacy is growing, so more people are aware of how to make their money work for them.
• Need for diversification: Investors are looking for ways to spread risk, especially in volatile markets like the stock market.
• Regulatory support: The government and financial regulators like SEBI are making sure everything runs smoothly and safely.

 

These factors have created an ideal environment for wealthier individuals (like HNIs and UHNIs) to put their money into PMSes and AIFs. And India is becoming a major global financial hub because of it!

 

If this growth trajectory continues, the overall industry is projected to surpass Rs 100 lakh crore by 2030, marking an over five-fold increase  in just six years. The potential for growth in the longer term depends on sustained growth, economic conditions, and investor interest, according to PMS Bazaar.

 

India's rapid economic growth, fuelled by government initiatives, domestic market expansion, and infrastructure investments, has created an environment ripe for alternative investments. 

 

As India aspires to have $35 trillion economy size by 2047 and enters its next phase of rapid development, PMSes and AIFs are increasingly becoming the vehicle of choice for HNIs and UHNIs, seeking more personalized and higher-yielding investment options.

 

Recent regulatory changes aimed to enhance investors’ protection are expected to further drive HNIs towards alternative investments. 

 

“The traditional equities industry, dominated by mutual funds, is experiencing a significant shift towards alternative investment structures such as Portfolio Management Services (PMS) and Alternative Investment Funds (AIF). These alternatives are gaining traction due to their potential for better risk-adjusted returns, especially in the post-COVID landscape. Projections suggest that it could see a 3-4x increase in the coming years. This trend underscores that alternatives are not just the future—they are rapidly becoming the present," said "Naveen Kulkarni, CIO, EVP, Axis Securities.  Key highlights: 

• PMS and AIF industry growing at aCAGR of about 33%, with assets rising from around Rs 1 lakh crore to Rs 18.87 lakh crore over the last decade (FY14 to FY25*).
• PMS and AIF assets are projected to surpass Rs 100 lakh crore by 2030, marking nearly a fivefold increase in just six years.
• Alternative assets surged twice as fast as Mutual Funds in five years
• Alternative investments are increasingly popular with HNIs and UHNIs, driven by customized solutions, higher returns, and greater diversification.