A New Middle Path for Indian Investors
Over the years, Indian investors have broadly had two clear choices when it came to professionally managed investments:
Mutual Funds
- Simple to understand
- Low minimum investment
- Highly regulated
- Limited strategy flexibility
Portfolio Management Services (PMS)
- Highly customised portfolios
- Advanced investment strategies
- Direct stock ownership
- High minimum investment requirement
But what if an investor wants smarter and more flexible strategies than traditional mutual funds —
without crossing the high entry barrier of PMS?
To bridge this gap, SEBI has introduced a new category called Specialised Investment Funds (SIFs).
Think of SIFs as a next-level mutual fund —
more flexible,
more strategic,
but still regulated and transparent.
Let’s break this concept down in the simplest possible way.
What is a Specialised Investment Fund (SIF)?
A Specialised Investment Fund (SIF) is a new category of mutual fund scheme that allows fund managers to use advanced, focused, and strategy-driven investment approaches — strategies that are usually not permitted in traditional mutual funds.
In simple words:
Mutual Funds
= Plain vanilla investing
- Simple structures
- Limited strategy flexibility
- Suitable for most investors
PMS
= Highly customised, complex investing
- Advanced strategies
- Direct stock ownership
- High minimum investment
SIF
= Smart, strategy-driven investing in between
- More flexible than mutual funds
- Lower entry barrier than PMS
- SEBI-regulated structure
Important to remember:
SIFs are still mutual funds, but they come with
greater flexibility in how the money is invested —
allowing fund managers to implement smarter and more tactical strategies.
How Do SIFs Work?
A Specialised Investment Fund (SIF) operates on a structure that is familiar — but with more flexibility under the hood.
Investors pool their money, just like they do in a mutual fund.
A professional and experienced fund manager manages the pooled corpus.
Unlike traditional mutual funds, the fund manager is allowed to use advanced and selective strategies.
What makes SIFs different?
- Take selective, high-conviction bets
- Use long–short strategies to manage risk
- Tactically shift across asset classes when market conditions change
The objective of SIFs is not just to beat a market index,
but to generate better risk-adjusted returns
across different market cycles.
Unlike traditional equity funds that depend heavily on rising markets, SIFs are designed to perform even when markets are volatile or moving sideways — not just when markets are going up.
SEBI Regulations & Minimum Investment Rules (2025)
Since Specialised Investment Funds (SIFs) use advanced and strategy-driven approaches, SEBI has introduced clear guardrails to ensure investor protection, transparency, and discipline.
Key regulatory framework set by SEBI
- Introduced by SEBI during 2024–25
- Can be offered only by SEBI-registered Mutual Fund houses
- Each SIF must follow a clearly defined strategy
- Strategy details must be fully disclosed to investors
- Minimum investment: ₹10 lakh per investor
- Higher transparency than traditional funds
- Periodic and detailed disclosures
- Designed for investors who understand market and strategy risk
Why the ₹10 lakh minimum investment?
This higher entry point ensures that only informed, financially prepared investors
participate in SIFs — investors who understand that
advanced strategies can involve higher risk along with higher opportunity.
Investment Strategies Permitted under Specialised Investment Funds (SIFs)
SEBI has outlined a structured framework of long–short investment strategies that can be adopted by Specialised Investment Funds (SIFs). These strategies are classified into Equity Oriented, Debt Oriented, and Hybrid categories. Each category operates within defined limits on asset exposure, allocation rules, and redemption timelines.
A. Equity Oriented Investment Strategies
These strategies invest mainly in listed equities and are allowed to take limited short positions using derivatives, capped at 25% of the fund’s net assets.
1. Equity Long Short Fund
Maintains high equity exposure with at least 80% invested in equities, while using derivatives to benefit from both rising and falling markets. The fund may be open-ended or interval-based, with daily or AMC-defined redemption.
2. Equity Ex Top 100 Long Short Fund
Invests a minimum of 65% in companies outside the top 100 by market capitalisation. Short positions up to 25% are taken in mid- and small-cap equities to capture valuation gaps in the broader market.
3. Sector Rotation Long Short Fund
Concentrates investments in up to four sectors with at least 80% equity exposure. Sector-level short positions up to 25% enable tactical shifts based on changing sectoral outlooks.
B. Debt Oriented Investment Strategies
Debt-oriented SIFs focus on fixed income securities while allowing selective short positions to manage interest rate and credit risks.
1. Debt Long Short Fund
Invests across fixed income instruments of varying maturities, with short exposure taken through exchange-traded debt derivatives. Structured as an interval fund with weekly or AMC-specified redemptions.
2. Sectoral Debt Long Short Fund
Invests in debt instruments across at least two sectors, with exposure to any single sector capped at 75%. Short positions up to 25% are used to capture relative value opportunities across debt segments.
C. Hybrid Investment Strategies
Hybrid strategies combine multiple asset classes and actively adjust allocations while using derivatives for tactical positioning.
1. Active Asset Allocator Long Short Fund
A multi-asset strategy spanning equities, debt, derivatives, REITs/InvITs and commodity derivatives. Short exposure across equity and debt is capped at 25%, with dynamic rebalancing based on market conditions.
2. Hybrid Long Short Fund
Maintains a minimum allocation of 25% each to equity and debt. Short positions up to 25% across both asset classes aim to deliver balanced, risk-adjusted returns.
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Benefits & Risks of Specialised Investment Funds
Specialised Investment Funds (SIFs) offer powerful capabilities — but they also demand a higher level of understanding from investors.
Benefits
- Access to advanced strategies not available in normal mutual funds
- Potential for better risk-adjusted returns
- Ability to perform in volatile or flat markets
- Managed by experienced and professional fund managers
- Fully regulated by SEBI
Risks
- Higher complexity compared to traditional mutual funds
- Returns may vary widely across different strategies
- Not suitable for short-term or first-time investors
- Requires patience and understanding of strategy-related risks
- ₹10 lakh minimum investment limits accessibility
In short, higher sophistication comes with higher responsibility.
Specialised Investment Funds vs Traditional Mutual Funds
While both are regulated investment products, SIFs and traditional mutual funds are designed for different investor needs.
| Feature | Traditional Mutual Funds | Specialised Investment Funds |
|---|---|---|
| Minimum Investment | Very low | ₹10 lakh |
| Strategy Flexibility | Limited | High |
| Complexity | Simple | Moderate to High |
| Suitable For | All investors | Experienced investors |
| Market Dependency | Mostly directional | Can be tactical |
Simply put, traditional mutual funds focus on simplicity, while SIFs focus on flexibility and strategy.
Who Should Invest in Specialised Investment Funds?
Specialised Investment Funds (SIFs) are designed for investors who are looking for advanced, strategy-driven investing and have some experience in the markets.
Already invest in mutual funds
Have a large portfolio
Understand market cycles and risks
Want diversification beyond traditional funds
Are comfortable staying invested for the medium to long term
Note: SIFs are not meant for beginners or for goal-based short-term investing.
Conclusion
Specialised Investment Funds (SIFs) are a significant evolution in India’s mutual fund landscape.
- More flexibility than mutual funds
- More structure and regulation than PMS
- Smarter strategies for mature portfolios
If used correctly, SIFs can act as a powerful portfolio enhancer — not a replacement for mutual funds, but a strategic addition.
As always, the key question is not “Is this product good?”
The real question is “Is this product right for me?”
And that answer lies in your goals, risk appetite, and investment maturity.
Have Questions About SIFs?
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💬 Chat on WhatsAppDisclaimer: The views and opinions expressed in this article are personal and for educational purposes only. They do not constitute an invitation, recommendation, or solicitation to invest in any financial product, including Specialised Investment Funds (SIFs) or mutual funds.
Mutual funds are subject to market risks, and the value of investments may go up or down. Past performance is not indicative of future results. Investors should read the scheme information document carefully and consult a qualified financial advisor before making any investment decisions.
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