Specialized Investment Funds (SIFs): India’s New Investment Avenue

 India’s investment landscape is evolving rapidly. To bridge the gap between traditional mutual funds and Portfolio Management Services (PMS), the Securities and Exchange Board of India (SEBI) introduced a new investment category called Specialised Investment Funds (SIFs), effective 1 April 2025.

Designed for seasoned and financially prepared investors, SIFs offer strategy-driven, high-flexibility portfolios within a regulated mutual fund framework—without the high entry barrier of PMS.

SIFs = More flexibility than mutual funds + Lower entry barrier than PMS

Let’s understand what SIFs are, how they work, and whether they are right for you.

Key Takeaways

• SIF full form: Specialised Investment Fund

• Introduced by SEBI (effective April 1, 2025)

• Bridges the gap between Mutual Funds and PMS

• Minimum investment: ₹10 lakh per PAN per AMC (unless accredited investor)

• Allows long–short strategies, sector rotation, dynamic asset allocation

• Unhedged short positions up to 25% via derivatives

• Liquidity may be limited with notice periods up to 15 working days

• Best suited for experienced, high-risk-tolerant investors

 

What is a Specialised Investment Fund (SIF)?

A Specialised Investment Fund (SIF) is a SEBI-regulated investment structure that allows Asset Management Companies (AMCs) to launch strategy-focused schemes with greater flexibility than traditional mutual funds.

SIFs are meant for investors who:

• Understand market cycles and derivatives

• Can commit higher capital

• Seek differentiated, high-conviction strategies

Unlike regular mutual funds, SIFs can:

• Take long and short positions

• Concentrate portfolios

• Actively shift across asset classes

Yet, they remain fully regulated under SEBI Mutual Fund Regulations, ensuring transparency and investor protection.

How Do SIFs Work?

SIFs operate as open-ended or interval schemes, depending on the strategy.

Key Operational Features:

• Invest across equity, debt, derivatives, REITs/InvITs, commodities

• Can take unhedged short positions up to 25% of NAV

• Redemption frequency may be daily, weekly, or periodic

• AMCs may impose exit notice periods up to 15 working days

• SIP, STP, and SWP are allowed (subject to minimum commitment)

Risk labeling follows a 1–5 risk band, and interval/closed-ended SIFs must be listed.

Why Were SIFs Introduced?

Traditional mutual funds:

• Have strict diversification rules

• Face limits on stock concentration

• Cannot easily run high-conviction strategies

PMS:

• Require ₹50 lakh minimum investment

• Suitable mainly for high-net-worth investors

🔹 SIFs fill this gap by allowing:

• Concentrated portfolios

• Active, high-conviction strategies

• Lower minimum investment than PMS

SEBI Regulations & Minimum Investment Rules (2025)

• Minimum investment: ₹10 lakh per investor (PAN level)

• Applies across all SIF strategies of a single AMC

• Does not include regular mutual fund investments

• Accredited investors are exempt from the ₹10 lakh rule

• Passive breaches due to market movement are allowed

• Active breaches (redemption reducing value below ₹10 lakh) may trigger exit

Types of Investment Strategies Allowed Under SIFs

A. Equity-Oriented Strategies

1. Equity Long–Short Fund

   • Min 80% equity exposure

   • Short exposure up to 25%

   • Strategy: Capture upside & downside

2. Equity Ex-Top 100 Long–Short Fund

   • Min 65% in mid & small caps

   • Focus on inefficiencies beyond large caps

3. Sector Rotation Long–Short Fund

• Max 4 sectors

• Tactical long & short sector bets

B. Debt-Oriented Strategies

1. Debt Long–Short Fund

   • Interest rate & duration strategies

   • Uses debt derivatives

2. Sectoral Debt Long–Short Fund

• At least two debt sectors

• Relative value & spread strategies

C. Hybrid Strategies

1. Active Asset Allocator Long–Short Fund

   • Equity, debt, REITs, commodities

   • Dynamic allocation across cycles

2. Hybrid Long–Short Fund

• Min 25% equity + 25% debt

• Balanced risk with tactical shorting

Benefits of SIFs

✅ Access to advanced strategies not available in regular mutual funds
✅ High-conviction, focused portfolios
✅ Multi-asset diversification
✅ Potential to generate alpha in volatile or falling markets

Risks of SIFs

⚠ High minimum investment (₹10 lakh)
⚠ Lower liquidity & exit restrictions
⚠ Higher volatility due to derivatives & concentration
⚠ Strong dependence on fund manager skill

Higher return potential always comes with higher risk.

SIFs vs Mutual Funds vs PMS

Feature	Mutual Funds	SIFs	PMS
Minimum Investment	₹500+	₹10 lakh	₹50 lakh
Portfolio Concentration	Low	Medium–High	Very High
Strategy Flexibility	Limited	High	Very High
Liquidity	High	Moderate–Low	Low
Target Investor	Retail	Informed / HNI	HNI

Who Should Invest in SIFs?

Specialised Investment Funds (SIFs) are designed for informed and financially prepared investors who can handle higher complexity and volatility.

✔ Investors with surplus investible capital (₹10 lakh or more)
✔ Those comfortable with market volatility and interim drawdowns
✔ Investors seeking non-traditional, strategy-driven investment approaches
✔ Individuals with a long-term investment horizon (5 years or more)
✔ Investors who understand derivatives, asset allocation shifts, and fund-manager-led strategies

❌ Not suitable for:

• First-time investors or inexperienced investors

• Capital-protection seekers or guaranteed-return seekers

• Short-term liquidity needs .i.e. Investors requiring high or immediate liquidity

• Those unwilling to accept fund-manager-dependent performance risk

Should You Invest in SIFs?

Specialised Investment Funds are not a replacement for mutual funds. Instead, they work best as an advanced allocation layer for investors who already have a strong foundation.

SIFs may be considered if you:

• Already have a well-diversified mutual fund portfolio

• Want to allocate a small portion of your capital to high-conviction, strategy-based investments

• Understand that higher return potential comes with higher risk

📌 Smart Portfolio Approach (Dhan Shiksha Framework)

Core Portfolio → Mutual Funds (Stability & Diversification)
Satellite Allocation → SIFs (Alpha & Tactical Strategies)

Build your foundation first. Add complexity only when you are ready.

Final Thoughts – Dhan Shiksha Perspective

Specialized Investment Funds represent the next evolution in India’s investment ecosystem. They encourage informed investing, deeper market participation, and strategy-driven wealth creation.

However, knowledge, discipline, and patience are key.
At Dhan Shiksha, our philosophy remains simple:

“Understand first. Invest later.”

DhanShiksha #SpecializedInvestmentFunds #SIF #SmartInvesting #IndianMarkets

#WealthCreation #LongTermInvesting #FinancialLiteracy #SEBI #NewInvestment

⚠️ Disclaimer

The content on Dhan Shiksha is for educational purposes only. We are not SEBI-registered advisors and do not offer financial recommendations. Please consult a certified financial advisor before making investment decisions. We do not accept responsibility for any financial losses resulting from reliance on this information.