SEBI (Securities and Exchange Board of India), India’s market regulator, recently introduced a fresh investment option called Specialized Investment Funds (SIFs). This new category officially came into effect on April 1, 2025.
SIFs aim to bridge the gap between mutual funds and portfolio management services (PMS). As a result, experienced investors can enjoy more flexibility in how they invest.
Traditionally, Indian investors had two primary avenues:
- Mutual Funds are accessible, SEBI-regulated, and designed for a broad range of investors.
- Portfolio Management Services (PMS) offer personalized strategies for high-net-worth individuals but require a steep minimum investment of ₹50 lakh.
SIFs now offer a smart middle path. You get the team-based, pooled investment approach of mutual funds, plus the flexibility and customization that PMS typically offer. Moreover, SIFs still operate under SEBI’s regulations, keeping investor safety intact.
Who Are Specialized Investment Funds Designed For?
Mutual funds are built for everyday investors. But, SIFs are meant for “well-informed” investors- people who know the risks and seek more control in their investment portfolios. These investors prefer a little more flexibility and variety in their portfolios.
Moreover, there is an important entry rule: you need to invest at least ₹10 lakh to get started. Because of this, SIFs naturally attract high-net-worth individuals (HNIs), family offices, and savvy investors who are looking for a more personalized investment experience.
How Do SIFs Differ from Mutual Funds?
At first glance, mutual funds and SIFs might look similar since both are regulated by SEBI. But dig a little deeper, and you will see a big difference.
Mutual funds stick to strict rules about where and how they invest. But SIFs give fund managers far more freedom. They can chase aggressive opportunities, switch across asset classes, and take bold tactical calls when needed.
How Are SIFs Different from PMS?
While SIFs offer flexibility, they are a lot more accessible than PMS. Usually, PMS requires you to invest ₹50 lakh and offers a fully personalized portfolio.
But SIFs work differently. They pool investments from multiple investors into one well-managed fund. So, you can still enjoy a flexible strategy- without paying the high entry cost that PMS demands.
Eligibility Criteria Specialized Investment Fund (SIF)
Not every mutual fund house can start a SIF. SEBI has put strict rules in place to allow only experienced players.
Route 1
First, the mutual fund must have proven its credibility over time.
- It should have been active in the market for at least three years.
- It must also maintain an average Assets Under Management (AUM) of ₹10,000 crore over the past three years.
- Moreover, there should be a clean regulatory record. No penalties or regulatory actions must have been taken against either the sponsor or the asset management company (AMC) under SEBI’s laws during that period.
Route 2
Alternatively, a mutual fund can qualify based on the strength of its leadership team:
- The fund must appoint a Chief Investment Officer (CIO) who has at least 10 years of experience managing assets worth ₹5,000 crore or more.
- Additionally, it must have a fund manager with a minimum of three years of experience handling portfolios worth ₹500 crore.
- Just like Route 1, the sponsor and AMC must have a clean record- no regulatory actions in the last three years.
Investment Rules and Restrictions for SIFs
When it comes to investments, SEBI has set clear ground rules to protect investors and ensure discipline.
Minimum Investment Requirements
- The minimum investment for SIFs is ₹10 lakh per investor. This amount must be maintained across all investment strategies, based on your PAN details.
- However, this rule applies only to investments in SIFs and not to regular mutual fund schemes offered by the same AMC (Asset Management Company).
Systematic Investment Options Are Allowed
- If you love the discipline of regular investing, you can still opt for SIPs (Systematic Investment Plans), SWPs (Systematic Withdrawal Plans), and STPs (Systematic Transfer Plans) in SIFs.
- Just remember, even when you use these options, you must meet the ₹10 lakh minimum investment requirement.
Investment Limits Within SIF Strategies
SIFs are allowed to invest flexibly, but they still have certain limits to manage risks:
- Up to 20% of the Net Asset Value (NAV) can be invested in AAA-rated debt instruments.
- Up to 16% of NAV can go into AA-rated debt.
- Up to 12% of NAV is allowed for A-rated or lower-rated debt instruments.
Moreover, a SIF should not invest more than 25% of its NAV in debt and money market securities of any single sector.
Investment Strategies Offered by Specialized Investment Funds (SIFs)
SIFs are designed to be versatile and dynamic. They offer multiple strategies across equity, debt, and hybrid asset classes.
Equity-Oriented Investment Strategies
SIFs can offer different types of equity-focused funds. Each comes with its own structure and rules:
Equity Long-Short Fund:
- At least 80% of the fund must be invested in equity and equity-related instruments.
- The maximum short exposure (through unhedged derivative positions) should not exceed 25%.
Equity Ex-Top 100 Long-Short Fund:
- Here, a minimum of 65% must be invested in equity and equity-related instruments, but only in stocks outside the top 100 by market capitalization.
- Again, maximum short exposure is capped at 25%, focused specifically on stocks beyond the large-cap segment.
Sector Rotation Long-Short Fund:
- At least 80% must be invested in equity and equity-related instruments within a maximum of four sectors.
- Short selling (through unhedged derivatives) is again limited to 25%.
Debt-Based Investment Strategies
SIFs also bring flexibility into the debt world with:
- Debt Long-Short Funds, and
- Sectoral Debt Long-Short Funds.
These strategies aim to take positions on both rising and falling debt market opportunities.
Hybrid Investment Strategies
Hybrid Long-Short Funds combine both equity and debt strategies, offering a balanced play between growth and stability.
Control on the Number of Strategies
To keep things simple, SEBI has introduced a rule: Each Asset Management Company (AMC) can offer only one investment strategy per category under the SIF framework. This ensures clarity for investors and avoids fund clutter.
Subscription, Redemption, and Listing Rules
SIFs can be launched as:
- Open-ended funds (allowing continuous buying and selling),
- Close-ended funds (where you invest once and redeem after maturity), or
- Interval funds (allowing purchase/redemption during specific periods).
Importantly, SIFs will not impose strict rules on when investors can subscribe or redeem under open-ended or interval strategies. Instead, the fund manager can select strategic intervals depending on the nature of the investment.
Also, keep in mind:
- Subscription and redemption frequencies are not direct opposites.
- The redemption notice period can be up to 15 working days.
- For close-ended and interval funds, listing on stock exchanges is mandatory to ensure liquidity for investors.
Benchmarking for Specialized Investment Funds
To maintain transparency, SIFs must follow a single-tier benchmark structure:
- Equity-oriented strategies must benchmark their performance against a broad market index like the BSE Sensex, NSE Nifty, BSE 100, or CRISIL 500 – depending on which index best matches their portfolio style.
- Debt-oriented strategies must be compared to a reliable debt market index that closely reflects the nature of the fund’s investments.
- Meanwhile, hybrid strategies (which mix equity and debt) should use a suitable broad benchmark wherever one is available.
Branding and Marketing Rules for SIFs
To avoid confusion between regular mutual funds and SIFs, SEBI mandates clear branding rules for SIFs.
Here’s how it will work:
- Each AMC offering SIFs must create a separate and distinct brand identity for its SIF schemes.
- For the first five years, AMCs are allowed to use the sponsor’s brand name, but only alongside phrases like “brought to you by” or “offered by” to make the distinction obvious.
- SIFs must also have their own dedicated website or webpage, keeping all information separate from regular mutual fund schemes.
- Moreover, every SIF must have its own logo and brand name, and in promotional materials, the SIF’s brand must appear at least as or even larger than the mutual fund brand name.
Risk Management for Specialized Investment Funds
Managing risk is essential. So SEBI has laid out a smart framework:
- Risk will be classified into five bands (Risk Band 1 to Risk Band 5) based on the fund’s exposure and investment style.
- These risk levels must be reviewed every month to ensure they stay up-to-date with market changes.
- SIFs are allowed to hold up to 25% of their net assets in exchange-traded derivative instruments for purposes other than simple hedging.
- However, the combined gross exposure across both cash and derivatives markets cannot exceed 100% of the fund’s net assets.
Final Words: A New Chapter in Indian Investing
With Specialized Investment Funds (SIFs), SEBI is opening the doors to a brand-new world of investing. If you are ready to move beyond the basics, SIFs could be the smarter, more flexible choice. As the financial world grows faster and smarter, SIFs offer more options for investors who want flexibility without losing safety. So, it is an exciting time to be an investor, and SIFs are a big part of why.
