Specialized Investment Funds

🎯 SEBI’s New Asset Class

 Specialized Investment Funds (SIFs)

On February 27, 2025, SEBI issued a circular introducing Specialized Investment Funds (SIFs)—a novel investment category positioned between traditional mutual funds and Portfolio Management Services (PMS), effective April 1, 2025. Aimed at sophisticated and high-net-worth investors, SIFs offer more advanced strategies while maintaining regulatory oversight.



✅ Who Can Launch & Invest in SIFs?

🏦 AMC Eligibility (Two Routes)

Track-Record Route
  • AMCs with 3+ years of operation and avg AUM ≥ ₹10,000 crore
  • Clean SEBI regulatory history

Experience Route

  • CIO with 10+ years managing ≥ ₹5,000 crore
  • Fund manager with 3+ years managing ≥ ₹500 crore

👤 Investor Eligibility

  • Minimum investment: ₹10 lakh per PAN (exempt for accredited investors)
  • Targeted at HNWIs, family offices, institutional investors, NRIs

🧩 Investment Strategies & Product Structure

Asset Class & Strategy Breakdown

SEBI allows one strategy per asset class:

Equity Strategies:

  • Long‑short equity (80%+ equity; ≤25% unhedged derivatives)
  • Equity Ex‑Top100 long‑short (65%+ equity; ≤25% shorts)
  • Sector Rotation long‑short (80%+ sectoral; ≤25% shorts)

Debt Strategies:

  • Debt long‑short
  • Sectoral debt long‑short

Hybrid Strategies:

  • Hybrid long‑short
  • Active asset allocation long‑short

Fund formats: Open-ended, close-ended, or interval

  • Close-ended units must be listed on exchanges for liquidity
  • Unhedged derivative exposure up to 25% of NAV

🛡️ Risk Controls & Compliance

Investment Restrictions
  • Equity: Limited single‐stock exposure (≤15% NAV)
  • Debt: AAA-rated ≤20%, AA ≤16%, A & below ≤12%; Sector cap 25%
Transparency & Branding
  • Distinct brand identity, logo, and website—separate from mutual fund names for five years
  • Detailed portfolio disclosures: top 10 holdings, turnover, derivatives usage, fees, NAV methodologies
  • AMCs must share bi-monthly portfolio updates
  • Distributors require NISM Series XIII (Derivatives) certification

💰 Fees & Taxation

Fee structure aligned with mutual fund regulations

Taxation:

  • Equity SIFs: 20% STCG (<1 yr) / 12.6% LTCG (>1 yr)
  • Debt/hybrid: taxed per investor’s slab rate

📩 Operational Process

  • SEBI has provided standardized application format and Investment Strategy Information Document (ISID) templates
  • Performance disclosures mandated:
    • Inception <1 yr: report absolute returns
    • >1 yr: show 1‑, 3‑, 5‑yr returns + past‑5‑yr bar chart

🧭 Final Take

SIFs mark a pivotal shift in India’s investment products—offering sophisticated, active management tools under a regulated structure and with mutual fund-level oversight. With qualified AMCs, minimum ₹10 lakh investment, and 25% unhedged derivative exposure, SIFs are designed for risk-savvy investors looking for nuanced strategies between traditional funds and PMS.


NISM Series XIII (Derivatives) – Mock Test