SIFs allow Asset Management Companies (AMCs) to offer more flexible and strategy-driven investment products, such as long–short equity strategies, sector rotation strategies, and multi-asset portfolios. These strategies were earlier mostly available only through hedge-fund-like structures. However, SIFs bring them within the regulated mutual fund ecosystem.

To invest in SIFs, investors must invest at least ₹10 lakh per AMC, calculated at the PAN level.

Why SEBI Introduced SIFs

SEBI introduced SIFs through regulatory amendments and a detailed circular issued on 27 February 2025, with the framework becoming effective from 1 April 2025.

The main objective was to fill the gap between two existing investment options:

• Mutual Funds: Suitable for retail investors but generally limited to long-only strategies.
• PMS and AIFs: Offer advanced strategies but usually require a minimum investment of ₹50 lakh or more.

Many investors wanted access to advanced strategies like long–short investing, derivatives trading, and multi-asset allocation, but within a well-regulated structure. SIFs were created to provide these strategies while maintaining the transparency and safeguards of the mutual fund industry.

Positioning of SIFs in the Investment Market

SIFs sit between traditional mutual funds and PMS/AIFs.

Traditional mutual funds mainly invest in equities or bonds using long-only strategies. They are designed for retail investors and follow strict investment rules.

On the other hand, PMS and Category III AIFs allow more freedom such as short selling, leverage, and complex strategies. However, these products require high minimum investments and are mainly used by ultra-high-net-worth investors.

SIFs combine the best of both worlds. They operate within the mutual fund framework but allow greater strategy flexibility. The minimum investment requirement of ₹10 lakh makes them accessible to affluent investors and family offices who want more sophisticated strategies without committing very large sums.

Eligibility for AMCs to Launch SIFs

Not every AMC can launch SIFs immediately. SEBI has introduced certain eligibility criteria to ensure that only experienced fund houses manage these complex strategies.

An AMC must:

• Be operational for at least three years
• Have an average AUM of ₹10,000 crore over the last three years

AMCs must also apply to SEBI with detailed information about the proposed strategies, risk management practices, and disclosures.

Additionally, fund houses must maintain a separate website or webpage for SIF products so that investors clearly understand that these are different from regular mutual fund schemes.

Structure of SIFs

SIFs operate under the same trust-based structure used by mutual funds. This means they include trustees, custodians, and SEBI-regulated intermediaries.

However, there is one key difference. Instead of launching traditional “schemes,” AMCs launch investment strategies under the SIF framework.

For each strategy, the AMC must prepare a document called the Investment Strategy Information Document (ISID). This document explains:

• Investment objective
• Asset allocation
• Use of derivatives
• Risk factors
• Fees and expenses

This ensures transparency for investors.

Minimum Investment Requirement

SIFs require a minimum investment of ₹10 lakh per investor per AMC, calculated at the PAN level.

For example, an investor can allocate ₹10 lakh across multiple SIF strategies within the same AMC, but the combined investment must meet the threshold.

Accredited investors are exempt from this minimum requirement. Additionally, mandatory investments made by AMC employees under “skin-in-the-game” rules are also exempt.

Investment Universe and Strategy Flexibility

One of the biggest advantages of SIFs is the flexibility they offer.

SIFs can invest in a wide range of assets including:

• Listed equities
• Equity derivatives
• Bonds and money market instruments
• REITs and InvITs
• Commodities-linked instruments

They can also take short positions and derivative exposures, allowing them to benefit from both rising and falling markets.

From 1 January 2026, investments in REITs by mutual funds and SIFs are treated as equity-related instruments, while InvITs continue to be classified as hybrid instruments.

Types of SIF Strategies

SIF strategies are broadly classified into three categories:

1. Equity-Oriented Strategies

These focus mainly on equities and equity derivatives.

Examples include:

• Equity Long-Short Funds: Buy undervalued stocks and short overvalued ones.
• Ex-Top 100 Long-Short Funds: Focus on mid- and small-cap stocks outside the top 100 companies.
• Sector Rotation Funds: Invest in selected sectors and shift exposure based on economic trends.

These strategies aim to generate returns even when markets are volatile.

2. Debt-Oriented Strategies

These strategies invest mainly in fixed-income instruments such as:

• Government securities
• Corporate bonds
• Money-market instruments

They may also use derivatives to manage interest rate risk or credit spreads.

3. Hybrid and Multi-Asset Strategies

Hybrid SIFs combine equities, debt, and other assets like REITs, InvITs, and commodities.

These strategies aim to balance growth, income, and diversification.

Risk and Disclosure Requirements

Because SIFs use complex strategies, SEBI requires strong disclosure and risk communication.

Each strategy must clearly explain:

• Use of derivatives
• Potential leverage
• Risk levels
• Possible drawdowns

Risk levels are usually indicated through a risk-o-meter, similar to mutual funds. Many SIF strategies may fall in the high or very high risk category due to the use of derivatives and short positions.

Taxation

SIFs are governed under mutual fund regulations, so their taxation generally follows mutual fund rules.

If the strategy maintains sufficient exposure to domestic equities, it may be treated as an equity-oriented fund for taxation purposes. Debt-oriented or certain hybrid strategies may be taxed differently.

However, taxation can vary depending on the portfolio structure and derivative usage, so investors should review the scheme documents carefully.

Benefits for Investors

SIFs provide several advantages.

• First, they offer access to advanced investment strategies at a lower ticket size compared to PMS or AIFs.
• Second, they can help diversify portfolios because many strategies aim to generate returns even during market downturns.
• Third, investors benefit from the institutional research, risk management, and governance of large AMCs.

Risks and Challenges

Despite their advantages, SIFs carry higher risks.

• Strategies involving derivatives and short selling can experience sharp losses if market conditions move against the fund manager’s view.
• Sector-focused strategies may also underperform if the selected sectors lag the broader market.
• Investors must understand that returns may be more volatile than traditional mutual funds.

Conclusion

Specialised Investment Funds represent an important innovation in India’s investment landscape. They give investors access to sophisticated strategies within the regulated mutual fund framework, while maintaining transparency and investor protection.

For AMCs, SIFs provide an opportunity to expand their product offerings and cater to high-net-worth investors. For investors, they offer a new way to diversify portfolios and access advanced investment techniques.

However, due to their complexity and risk, SIFs are best suited as satellite investments within a broader portfolio rather than as core holdings.

Disclaimer: The article is for informational purposes only and not investment advice.