Considering the emergence of investors with a higher risk appetite and larger ticket sizes, market regulator SEBI launched a new product called Specialised Investment Fund (SIF) in July 2024. The aim was to bridge the gap between mutual funds and portfolio management services in terms of flexibility in portfolio construction.
On February 27, 2025, SEBI published a consultation paper on draft securities market regulations for Specialised Investment Funds (SIFs). This framework is set to come into effect from April 1, 2025. Let’s explore what it entails.
What’s Happening?
SEBI has announced the regulatory framework for SIF, which includes the following:
Eligibility Criteria for SIF
A registered mutual fund can establish an SIF through one of the following routes:
Sound Track Record: The mutual fund must have been in operation for at least three years, with an average AUM of Rs 10,000 crore in the immediately preceding three years.
Alternate Route: Fund managers must have managed a substantial AUM and possess significant experience, as prescribed by SEBI.
Branding
AMCs must ensure that the SIF has a unique brand name and maintains a separate website, distinct from its regular mutual fund business. Additionally, the SIF must have a separate identity to clearly differentiate its offerings from those of a mutual fund.
Investment Strategies
As per SEBI, a mutual fund scheme launched under the SIF must follow specific investment strategies. Currently, the permitted strategies include Equity-Oriented, Debt-Oriented and Hybrid Investment Strategies.
To maintain clarity and prevent excessive diversification, only one investment strategy can be launched under each category.
Minimum Investment Threshold
AMCs are not allowed to accept investments below Rs 10 lakh. However, if the investment value falls below this threshold due to a market decline, it will be considered a passive breach and not treated as a violation. In such a case, the investor will only be permitted to redeem the entire remaining investment from the SIF.
Investment Restrictions Under SIF
Investment in debt and money market securities is restricted as follows:
AAA-rated instruments: Up to 20% of NAV
AA-rated instruments: Up to 16% of NAV
A-rated and below: Up to 12% of NAV, with an additional 5% allowed upon trustee and AMC board approval
Sectoral exposure in these securities is capped at 25% of NAV
Investment in Derivatives
SIF investment strategies can allocate up to 25% of net assets to exchange-traded derivatives, beyond hedging and rebalancing purposes.
Subscription and Redemption
The subscription and redemption frequency of investments may be based on the nature of the investment and can be daily, weekly, monthly, or at any other suitable interval.
Benchmarking
SIF investment strategies will follow a single-tier benchmark, with an optional second-tier benchmark at the AMC’s discretion. AMCs must select a broad market index based on the investment objective and portfolio composition.
Specialised Investment Fund – New Asset Class by SEBI
The Specialised Investment Fund (SIF) is designed for investors seeking advanced investment strategies and aiming to bridge the gap between Mutual Funds and Portfolio Management Services (PMS). It serves as a distinct asset class, offering higher-ticket investment products to cater to the evolving needs of emerging investors.
According to SEBI, the absence of such a product has driven investors toward unregistered and risky schemes that promise unrealistic returns. Introducing a regulated investment option in this segment would help curb unauthorised investments and provide a safer, structured alternative.
Investors can choose SIP, SWP, or STP, but the total investment must exceed Rs 10 lakh.
Why Did SEBI Launch SIF?
There is a lack of investment options for retail investors with a decent amount of capital and a higher risk appetite.
PMS is designed for HNIs and requires a minimum investment of Rs 50 lakh.
Alternative Investment Funds (AIFs) require a minimum investment of Rs 1 crore.
This restricts many investors with capital between Rs 10 to Rs 20 lakh.
Furthermore, traditional mutual funds follow pre-defined investment strategies mentioned in their fund prospectus, making them a viable option for conservative investors but limiting higher-risk opportunities.
What’s Next?
The launch of SIF presents opportunities for experienced investors with substantial capital and a higher risk appetite.
SEBI has instructed the Association of Mutual Funds in India (AMFI) to issue necessary guidelines by March 31, 2025. Stock exchanges and clearing corporations are required to update the regulations accordingly.
The introduction of SIFs will allow investors to invest in regulated products and avoid unregistered, high-risk schemes that promise unrealistic returns. Additionally, the inclusion of derivatives investments makes SIFs unique compared to traditional mutual funds, where such exposure is not permitted.
*This article is for informational purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
