Every term, plain English.
The vocabulary of PMS, AIF and GIFT City investing — defined in one line each, no circular jargon, grouped by theme so you can find it fast.
32 terms worth knowing.
Private-market investing carries a thick vocabulary, and the words do real work — a single term can change how a return is read or how a fee is charged. We have grouped the essentials into four themes: the products and structures themselves, how returns and risk are measured, what the whole thing costs and how it is taxed, and the safeguards that keep your money where it belongs. Skim the group you need.
The vehicles themselves, and the legal shapes they take.
- PMS
- Portfolio Management Service — direct, professionally managed equity held in your own demat, not units of a pooled fund. The SEBI minimum is ₹50 lakh.
- AIF
- Alternative Investment Fund — a privately pooled vehicle for sophisticated investors, with a ₹1 crore minimum, split by SEBI into Categories I, II and III.
- Discretionary mandate
- An arrangement where the manager makes and executes investment decisions on your behalf, within an agreed strategy, without seeking approval trade by trade.
- Mandate
- The written brief that defines what a manager may buy, the strategy they must follow and the limits they must respect. Your guardrail against style drift.
- Close-ended
- A fund with a fixed life and a lock-in: you commit for a set term and cannot redeem at will. Common in Category I and II AIFs.
- Lock-in
- A period during which you cannot redeem your investment. It buys the manager time to let an illiquid strategy play out.
- In-specie transfer
- Moving the actual underlying securities in or out of a portfolio, rather than cash — useful when you want to retain holdings instead of triggering a sale.
- GIFT City / IFSC
- India's International Financial Services Centre. It lets NRIs invest in USD with a lighter tax regime and repatriation in roughly two days.
How performance is measured, and how the bumps are described.
- Alpha
- The return a manager adds above what the benchmark would have given you. Positive alpha is the whole reason to pay for active management.
- Benchmark
- The reference index a fund is measured against. Beating it is the bar; the choice of benchmark shapes how flattering the comparison looks.
- Benchmark TRI
- The Total Return Index version of a benchmark — it reinvests dividends, so it is a fairer, tougher bar than a plain price index.
- CAGR
- Compound Annual Growth Rate — the smoothed, annualised return over a period of a year or more. The standard way to quote multi-year performance.
- XIRR
- The annualised return on a series of cash flows that arrive at irregular dates — the right measure when you invest and withdraw in instalments.
- TWRR
- Time-Weighted Rate of Return — strips out the timing and size of your contributions to isolate the manager's skill. The fair way to compare managers.
- NAV
- Net Asset Value — the per-unit value of a pooled fund, struck periodically. For a PMS, your portfolio value plays the equivalent role.
- Drawdown
- A peak-to-trough fall in value. Max drawdown is the worst such fall on record — often a more honest risk gauge than volatility alone.
- Sharpe ratio
- Return earned per unit of risk taken. A higher Sharpe means a smoother ride for the same return — quality of return, not just quantity.
What the structure costs you, and how the taxman treats it.
- Performance fee
- A share of the gains, often 10–20%, that a manager charges on returns above the hurdle. It aligns them with you — but only above the bar.
- Hurdle rate
- The minimum return a manager must beat before any performance fee applies — frequently in the 8–10% range.
- High-water mark
- The highest value your portfolio has previously reached. A performance fee is only charged on gains above it, so you never pay twice for the same rupee of return.
- Catch-up
- A fee clause that, once the hurdle is cleared, lets the manager claim performance fee on the earlier gains too — effectively catching up to a full share.
- Exit load
- A charge for redeeming before a stated period is up. It discourages early exits that would disrupt the strategy for everyone else.
- TER
- Total Expense Ratio — the all-in annual running cost of a fund as a percentage of assets, bundling management, admin and operating charges.
- Pass-through taxation
- Where fund income is not taxed inside the structure but flows through to be taxed in your hands. Standard for AIF Categories I and II.
- LTCG
- Long-Term Capital Gains tax — the rate applied when you have held an asset beyond the qualifying period, generally lower than the short-term rate.
- STCG
- Short-Term Capital Gains tax — the rate applied when you sell inside the qualifying holding period, generally higher than the long-term rate.
The plumbing that keeps your money where it should be.
- AUM
- Assets Under Management — the total pool of money a strategy or firm manages. Scale can signal trust, but very large AUM can also blunt a nimble strategy.
- Custodian
- The independent institution that holds your securities and cash, separate from the manager. It is why the manager can trade your portfolio but never abscond with it.
- Demat
- A dematerialised account that holds your shares in electronic form. In a PMS it is opened in your own name, so the holdings are unmistakably yours.
- Segregated account
- A portfolio held distinctly in your name, never co-mingled with other investors' money — the structural heart of how a PMS keeps ownership clean.
- Repatriation
- Moving investment proceeds back out of India to your home country. The ease and speed of it depends on the account type and route you used.
- Nyra Score
- Our 0–10 composite score across seven pillars — Returns, Risk, Manager tenure, Fees, Concentration, Transparency and AUM — so funds compare on more than headline return.
When a term does the selling, slow down.
Most mis-sold products hide behind one flattering word — a soft benchmark, a return quoted gross, a fee clause buried in jargon. Knowing what each term really means is the cheapest protection you have.
The terms people most often confuse.
Why does the benchmark choice matter so much?
Because every return is relative. A fund compared against a soft index can look brilliant while barely keeping pace with the market. Always check the return against a Total Return benchmark — one that reinvests dividends — and against the index that genuinely reflects the strategy's universe.
TWRR or XIRR — which return should I trust?
They answer different questions. TWRR isolates the manager's skill by removing the effect of when you added or withdrew money, so it is best for comparing managers. XIRR captures your actual experience including timing, so it is best for judging what your own money earned. Look at both.
How do the high-water mark and hurdle protect me?
Together they make sure you only pay for genuine, new outperformance. The hurdle sets a minimum return the manager must beat before any performance fee applies; the high-water mark ensures you are never charged twice on the same gains after a recovery from a fall. Watch for a catch-up clause, which can claw back fee on earlier gains once the hurdle is cleared.
What is the simplest way to picture a custodian?
Think of the manager as the driver and the custodian as the garage that actually owns the keys cabinet. The manager can decide where your portfolio goes, but your securities and cash sit with an independent custodian — which is the structural reason your assets cannot simply walk off.
Still have a question?
Educational only, not investment advice. Figures are current to FY2025-26 and may change. Investments are subject to market risks; read all scheme documents carefully.