The Indian mutual fund industry as on 31st May 2025, manages over ₹72 lakh crore in assets, which is a 6 fold increase in a span of 10 years. However, as investors’ sophistication deepens, the need for more customized, strategy-driven investment vehicles has grown stronger. That’s where Specialized Investment Funds (SIFs) come in.
What are SIFs?
SIFs are a new category under SEBI’s mutual fund framework designed to offer fund houses the flexibility to launch differentiated investment strategies—many of which were earlier only accessible via PMS or AIF platforms.
SIFs will allow mutual funds to create strategies like long-short equity, sector rotation, debt arbitrage, and hybrid asset allocation—all with the transparency, liquidity, and tax efficiency of the mutual fund structure.
Why Were SIFs Needed?
- Gap Between MFs and PMS/AIFs: PMS and AIFs, whilst flexible, often demand high ticket sizes (₹50 lakh and up) and come with lower transparency relative to MF. SIFs offer a middle path.
- Evolving Investor Expectations: With monthly SIP inflows surpassing ₹26,000 crore and over 8.5 crore active SIP accounts, many investors are ready for more advanced strategies.
- Need for Risk-Managed Innovation: Market volatility and complex macro conditions have created demand for hedged, dynamic, or concentrated exposure—something SIFs are built to offer.
Who Can Invest?
Any mutual fund-eligible investor can invest in SIFs, subject to a minimum investment of ₹10 lakh across all SIF strategies from a single AMC. For example, if an investor allocates ₹6 lakh to a hybrid strategy and ₹4 lakh to an equity SIF from Edelweiss, they meet the threshold. Direct plans will be available, and taxation is likely to remain the same as mutual funds.
SIF Strategy Framework
Under SEBI’s guidelines, an AMC can offer 7 SIF strategies: 3 in Equity, 2 in Debt, and 2 in Hybrid. In all of these strategies, the fund will be allowed to create short positions via unhedged derivatives capped at 25% of the total fund’s value. The following are a few details regarding the strategies.
Equity-Oriented Strategies
- Equity Long Short: This will have a minimum 80% exposure in equities and equity related instruments.
- Equity ex-Top 100 Long Short: Focus on equity and equity-related instruments, excluding the top 100 stocks with a minimum 65% equity exposure.
- Sector Rotation Long-Short: This strategy will allow a Maximum allocation of up to 4 sectors with no limit on maximum exposure in any sector.
Debt-Oriented Strategies
- Debt Long-Short: This strategy will allow investments in debt instruments across duration.
- Sectoral Debt: Investment in Debt Instruments of at least 2 sectors, with a maximum investment of 75% in a single sector.
Hybrid Strategies
- Active Asset Allocator Long Short: Investment across equity, debt, REITs/InvITs, and commodities.
- Hybrid Long Short: Investments in equity and debt, with minimum exposure of 25% in each asset class.
SIFs aim to bring the sophistication of PMS/AIF strategies into the regulated, cost-efficient mutual fund framework. With the 1st SIFs to be launched as early as in the next two months, investors may soon have access to strategies previously out of reach, without compromising on transparency or liquidity.
As always, suitability for your portfolio is critical. We may be looking for a customized, risk-aware approach to portfolio building using SIFs in addition to the other parts of the portfolio, as more information on SIF offerings become available.
Disclaimers:
Investments in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI, membership of BASL and certification from National
Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
The information is only for consumption by the client and such material should not be redistributed.
The securities quoted are for illustration only and are not recommendatory.
This material is for information and educational purposes only.