SIFs: Bridging the gap in modern day investing to unlock potential

SIFs bridge the gap between traditional mutual funds and high-ticket investment vehicles like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).

In the rapidly evolving world of investments, innovative products and strategies continue to emerge to meet the diverse needs of investors. Over the years, the Indian investment landscape has transformed significantly - from a single traditional product like bank fixed deposits to a wide basket of options such as mutual funds, PPF, NPS, AIFs, and PMS. This evolution reflects investors' growing appetite for higher returns to outpace inflation. 

 

While almost every income segment had something to invest in, a gap still existed.

 

To address this, the Securities and Exchange Board of India (Sebi) introduced a new category in April 2025: Specialised Investment Funds (SIFs). These funds bridge the gap between traditional mutual funds and high-ticket investment vehicles like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).

 

What is a SIF?

A Specialised Investment Fund is a Sebi-regulated pooled investment vehicle designed for investors seeking advanced strategies, greater flexibility, and access to niche opportunities. Unlike retail-friendly mutual funds, SIFs cater to investors who may not qualifY - or prefer not to commit - the ₹50 lakh minimum required for PMS but are comfortable with higher risk in exchange for potentially superior returns.

 

Think of SIFs as a door connecting two worlds of investment world: 

• Not as retail focused as mutual funds.
• Not as exclusive or high-ticket as PMS.
• Strategic in nature, incorporating features of AIFs such as derivatives and hedging strategies, while retaining mutual fund-like tax benefits.

 

Key Features of SIFs

• Minimum Investment: ₹10 lakh (lower than PMS at ₹50 lakh and AIFs at ₹1 crore, but higher than mutual funds at ₹5,000 for lump sum or ₹250 SIP).
• Regulation: Governed by SEBI to ensure transparency and investor protection.
• Advanced Strategies: Includes equity long-short, structured debt, thematic, and hybrid models.
• Target Audience: High-net-worth individuals (HNIs) and accredited investors seeking tax-efficient, advanced strategies.

 

In essence, SIFs combine the regulated structure of mutual funds with the strategic flexibility of PMS, making them an attractive mid-tier option for option for investors who want more than basic mutual funds but without the steep entry barriers of PMS or AIFs.

 

Types of SIFs

Sebi permits seven fund types across three categories: 

A. Equity-Oriented Strategies

1. Equity Long-Short Fund: Minimum 80 per cent in equities; up to 25 per cent unhedged short via derivatives.

2. Equity Ex-Top 100 Long-Short Fund: Minimum 65 per cent in stocks beyond top 100; up to 25 per cent short exposure.

3. Sector Rotation Long-Short Fund: 80 per cent in up to 4 sectors; 25 per cent short allowed at sector level.

 

B. Debt-Oriented Strategies

1. Debt Long-Short Fund: Invests in debt instruments; short positions via debt derivatives.

2. Sectoral Debt Long-Short Fund: Minimum two debt sectors; max 75 per cent per sector; up to 25 per cent short exposure.

 

C. Hybrid Strategies

1. Active Asset Allocator Long-Short Fund: Dynamic allocation across asset classes; 25 per cent short exposure allowed.

2. Hybrid Long-Short Fund: Minimum 25 per cent each in equity and debt; up to 25 per cent short exposure.

 

Benefits of Investing in SIFs

• Access to Advanced Strategies: Participate in hedging, structured debt, and thematic plays—previously limited to institutional or ultra-HNI investors.
• Diversification Beyond Traditional Assets: Exposure to private equity, venture capital, real estate, and infrastructure projects.
• Professional Management: Managed by Sebi-registered AMCs with expertise in complex strategies.
• Potential for Higher Returns: Niche strategies can deliver superior long-term returns (with higher risk).
• Regulated Flexibility: Operates within SEBI’s framework, ensuring transparency  and investor protection.

 

Place of SIFs in an Investor's Portfolio:

SIFs are best suited for experienced investors who understand market cycles and have a long-term horizon. Here's how they fit:

 

• Portfolio Diversifier: Adds strategic depth and access to advanced strategies not available in retail mutual funds.
• Alternative Asset Gateway: Offers exposure to private markets and structured products without PMS/AIF entry barriers.
• Long-Term Wealth Creation: Ideal for goals like wealth accumulation, legacy planning, or large future expenses.Tax Efficiency: Enjoys mutual fund-like tax benefits depending on the asset class.

 

Conclusion

Specialised Investment Funds represent a significant innovation in India's financial ecosystem. They offer a middle ground between mutual funds and PMS, combining professional management, strategic flexibility, and regulatory oversight. For discerning investors with a desire for portfolio diversification, SIFs can be a powerful tool to access niche opportunities and alternative assets.

 

The goal is to make SIFs as accessible and seamless as mutual funds. Equipping distributors with practical knowledge, tools, and ongoing digital support helps foster growth and confidence in India’s evolving investment landscape.    ===============  Disclaimer: Vishranth Suresh is Co-Founder & CEO at Asset Plus. Views expressed are his own