What is a Specialised Investment Fund (SIF)? Explained for Indian investors

Securities and Exchange Board of India (SEBI) introduced a new framework to meet the needs of India’s diverse investor base with the aim to help the financial ecosystem evolve. One such advancement is the SIF. The full form of SIF is Specialised Investment Fund, a recently introduced category that seeks to fill the gap between traditional mutual funds and high-ticket investment vehicles such as Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).

SIFs offer a compelling alternative for investors who possess a deep understanding of the market and are seeking enhanced flexibility, advanced strategies, and the potential for higher returns.  Specialised Investment Fund, became effective from April 1, 2025, under the SEBI (Mutual Funds) Regulations, 1996. This introduces a new asset class tailored for sophisticated investors.

What is a Specialised Investment Fund (SIF)?

A Specialised Investment Fund (SIF) is a pooled investment vehicle designed for investors who are comfortable with higher risk in exchange for greater portfolio flexibility and potentially enhanced returns. These funds differ from traditional mutual funds in their structure, strategy, and minimum investment requirements.

SIF or Specialised Investment Fund, is particularly important for investors new to this category, as it indicates a specific type of fund introduced under the mutual fund regulations. The SIF meaning lies in its structural difference from traditional mutual funds and its suitability for more sophisticated strategies.

SIFs are professionally managed and operate under SEBI’s regulatory framework, ensuring investor protection and transparency. What sets SIFs apart is their ability to employ advanced investment techniques, often involving derivatives, long-short positions, sector rotation, and hybrid strategies.

With a minimum investment requirement of ₹10 lakh per investor, SIFs are positioned between mutual funds and portfolio management services, making them accessible to a broader set of high-net-worth individuals without the steep capital thresholds of PMS or AIFs.

Investment universe and strategy types

SIFs offer a diverse set of strategies, grouped broadly into three categories. These go beyond the standard investment categories followed by traditional mutual funds.

Equity-oriented strategies:

1. Equity long-short funds maintain a minimum of 80% exposure to equities while also taking short positions of up to 25% to hedge risks or take contrarian bets.
2. Equity ex-top 100 long-short funds focus on mid- and small-cap companies, explicitly excluding India’s top 100 large-cap firms to tap into emerging growth opportunities.
3. Sector rotation long-short funds employ tactical allocation strategies by shifting focus between sectors based on macroeconomic and market trends.

Debt-oriented strategies:

1. Debt long-short funds employ advanced fixed-income techniques, including duration management and credit rotation, to optimise returns.
2. Sectoral debt long-short funds focus on specific sectors within the debt market, allowing fund managers to exploit sector-specific opportunities.

Hybrid strategies:

1. Active asset allocator funds dynamically allocate capital across various asset classes, including equities, debt instruments, real estate investment trusts (REITs), and commodities.
2. Hybrid long-short funds maintain a minimum of 25% allocation to both equity and debt, creating a balanced structure that can navigate varying market conditions.

Operational framework of SIFs

To truly grasp what SIF is and how it differs from traditional options, it is essential to look at its operating mechanics. SIFs are governed by operational guidelines to ensure investor safety whilst also providing fund managers with strategic leeway.

• Derivatives: Up to 25% of the portfolio can be allocated to derivatives for purposes beyond hedging, enabling enhanced strategy deployment.
• Single stock limit: SIFs can invest up to 15% of a company’s paid-up equity capital, compared to the 10% limit under mutual funds.
• Debt allocation caps:
  1. AAA-rated: Maximum 20% per issuer
  2. AA-rated: Maximum 16%
  3. A-rated or below: Maximum 12%
  REITs and InvITs Exposure: SIFs can invest up to 20% of net assets in these instruments, compared to 10% under mutual funds.
• Sector concentration: A maximum of 25% may be invested in any one sector, to prevent overexposure and encourage diversification.

Why SEBI introduced SIFs

The rationale behind introducing Specialised Investment Funds lies in addressing a key gap within the investment ecosystem:

• Bridging the gap: Many sophisticated investors found mutual funds too restrictive, while PMS and AIFs required investment amounts that were out of reach.
• Expanding access: With PMS requiring ₹50 lakh and AIFs needing ₹1 crore as minimum investments, SIFs present a more accessible alternative at ₹10 lakh.
• Encouraging innovation: SEBI aims to foster innovation by allowing fund managers greater flexibility in deploying advanced strategies.
• Ensuring regulation: While offering flexibility, SIFs are still governed by SEBI regulations, ensuring investor safety through transparency and compliance.

Key benefits of Specialised Investment Funds

Enhanced strategic flexibility:
SIFs allow fund managers to deploy dynamic and advanced investment strategies, which are typically not available within the conventional mutual fund space. These include short selling, derivatives trading, and active asset allocation. The core of the SIF meaning is its ability to offer dynamic and diversified investment options.

Professional management:
Each SIF is managed by experienced professionals who meet SEBI’s stringent criteria. Chief Investment Officers must have at least ten years of experience managing significant assets, ensuring that the strategies are executed by capable hands.

Improved diversification:
SIFs offer exposure to a range of instruments such as REITs, InvITs, and commodity-linked products, providing investors with diversification benefits not typically available in traditional mutual funds.

Regulatory protection:
Despite their strategic complexity, SIFs remain within a structured regulatory framework. Regular disclosures, defined risk bands, and compliance protocols help maintain investor trust.

Lower capital threshold:
With a ₹10 lakh minimum investment, SIFs are more accessible than PMS and AIFs, offering a gateway to advanced strategies without extremely high capital commitment.

How SIFs differ from mutual funds

Who is offering SIFs in India?

Several asset management companies have already received SEBI approval to launch SIFs, while many others have applied for licences. Some of the approved fund houses are mentioned below:

• Quant Mutual Fund: First to launch a SIF in August 2025 (QSIF Equity Long-Short Fund)
• Edelweiss Mutual Fund: Introduced Altiva SIF focused on long-short strategies
• Mirae Asset Mutual Fund: Launched its Platinum SIF range
• SBI Mutual Fund: Offers equity and hybrid SIFs under the Magnum brand
• ITI Mutual Fund: Received approval and initiated SIF offerings
• DSP Mutual Fund: Approved for SIF operations

Key factors to evaluate before investing in SIFs

Risk tolerance: SIFs employ high-risk strategies such as short-selling and derivatives trading. Investors must be comfortable with volatility and potential capital loss.

Investment horizon: Due to the complexity of the strategies employed, SIFs are better suited for long-term investors with at least a three to five-year outlook.

Financial stability: The ₹10 lakh minimum should only be a part of a well-diversified portfolio. Investors should avoid overexposure to a single fund or strategy.

Strategy comprehension: Investors must understand the specific SIF meaning and the strategy employed by the chosen fund. Complex techniques require a sound grasp of market mechanics and risk factors.

Fund manager evaluation: The experience and past performance of the fund manager should be carefully examined. A proven track record in similar strategies is essential.

Cost structure: SIFs may carry higher expense ratios and performance-based fees. These should be weighed against the potential returns.

Who should consider investing in SIFs?

SIFs are not suited to all investors. They are ideal for:

• High-net-worth individuals with ₹10 lakh or more in investible surplus
• Sophisticated investors with knowledge of advanced market strategies
• Experienced market participants seeking alternatives to mutual funds and PMS
• Risk-tolerant investors prepared for fluctuations and drawdowns

Conclusion

The introduction of Specialised Investment Funds marks a transformative development in India’s investment landscape. These funds provide a new avenue for investors seeking advanced strategies within a regulated environment. SIFs offer a compelling blend of flexibility, professional management, and favourable tax treatment, all while maintaining robust investor protections.

However, their complexity and risk profile also mean that one needs to ensure it fits into their financial strategy, due diligence remains key.  Investors must conduct thorough analysis, understand the specific SIF meaning, and ensure the investment aligns with their broader financial objectives.

As the SIF market evolves, it is expected to become a cornerstone in the portfolios of experienced and financially capable investors. With the right knowledge and preparation, SIFs could serve as a valuable tool for long-term wealth creation.