What is Specialized Investment Funds (SIFs):
SEBI – The Securities and Exchange Board of India (SEBI) introduced a new category called as Specialized Investment Funds (SIF), effective from April 1, 2025. SIF offers a bridge between mutual funds and portfolio management services (PMS).
SIF offers flexibility in portfolio with enhanced dynamic asset allocation, sector rotations. The minimum investment commences from Rs.10 lakh. It is designed particularly for seasoned investors. SIF operates within a structured and transparent regulatory environment.
Key Takeaways
SIF is a abbreviation. The full form is Specialized Investment Fund. Redemption may be less frequent, AMCs may impose notice periods up to 15 days. It is designed for the investors who seek asset allocation methods within a regulated framework.
SIFs are best suited for experienced or high net worth investors who understand market cycles, are comfortable with volatility, and do not require high liquidity. Asset Management companies can provide strategic focused schemes with great portfolio, flexibility than traditional mutual funds.
SIFS use complex investment strategies, long short equity including sector based positioning, and active asset allocation, which takes unhedged short positions up to 25% of their portfolio using derivatives. These schemes are suitable for investors who are comfortable with complex financial products and meet the minimum investment requirement of Rs.10 lakh.
Based on the investment approach, SIFs follow equity oriented, debt oriented or hybrid strategies. SEBI provides flexibility for interval strategies under SIFs by exempting them from maturity matching norms applicable to regular interval funds.
Investors, new to Specialized Investment Funds wish to understand how they compare with newly launched mutual funds. Our detailed guide on NFO basics explains how New Fund Offers (NFOs) are structured, their risks, and how they differ from strategy-specific funds like SIFs.
How Do SIFs Work?
Specialized Investment Funds (SIFs) operates under the SEBI Mutual Fund Regulations as a distinct category offering strategy specific schemes with enhanced flexibility.
SIFs are designed to execute sophisticated investment strategies like:
Equity long short
Sector rotation Ling Short
Debt Long Short
Active Asset Allocator Long Short etc.
Each scheme under SIF is structured as either an open ended or interval fund, depending on the strategy type. AMCs can design these funds to invest across various asset classes such as listed equities, debt instruments, commodity derivatives, and REITs/InvITs. A key feature is the ability to take unhedged short positions of up to 25% of the net assets using derivatives, providing exposure to both upward and downward market movements.
To participate, investors must meet a minimum investment requirement of ₹10 lakh, unless they qualify as accredited investors, who are exempt. SEBI permits the use of SIP, SWP, and STP, as long as the overall investment meets the minimum threshold.
Unlike standard mutual funds, SIFs may involve less frequent redemption options, ranging from daily to monthly or even fixed maturity. AMCs can also impose notice periods of up to 15 working days for redemptions. Additionally, SIFs are subject to strict disclosure norms, risk labeling (1 to 5 bands), and listing requirements if they follow a closed ended or interval structure.
SEBI Regulations & Minimum Investment Rules (2025)
SIF minimum investment ₹10 lakh is mandated under Regulation 49X(1) of SEBI’s Mutual Fund Regulations. This applies per investor at the PAN level across all SIF strategies offered by a single Asset Management Company (AMC).
The ₹10 lakh threshold is not scheme-specific. It represents the total commitment across all SIFs under one AMC, and does not include investments in the AMC’s regular mutual fund schemes.
As per accredited investor rules, individuals or entities qualifying as accredited investors are exempt from the ₹10 lakh minimum investment requirement in SIFs.
AMCs are permitted to offer SIP (Systematic Investment Plan), SWP (Systematic Withdrawal Plan), and STP (Systematic Transfer Plan) under SIFs, provided that the cumulative commitment across these modes satisfies the ₹10 lakh threshold—unless the investor qualifies under accredited investor rules.
Daily monitoring is required to ensure continued compliance. While passive breaches due to market fluctuations are not violations, if the investment value falls below ₹10 lakh due to active redemption or transfers, the AMC may require the investor to exit the SIF.
Types Investment Strategies Allowed Under Specialised Investment Funds
SEBI has approved a defined set of long short strategies for Specialised Investment Funds, categorized into Equity Oriented, Debt Oriented, and Hybrid Strategies. Each strategy comes with specified exposure limits, asset allocation mandates, and redemption frequency norms.
A. Equity Oriented Investment Strategies
These strategies primarily invest in listed equities, with the option to take short positions through derivatives (up to 25% of the fund’s net assets).
1. Equity Long Short Fund
Equity Allocation: Minimum 80% in equities and equity related instruments
Short Exposure: Up to 25% through unhedged equity derivatives
Structure: Open ended or interval fund
Redemption Frequency: Daily or as specified by the AMC
Strategy Focus: Capture both upward and downward price movements using long and short equity positions.
2. Equity Ex Top 100 Long Short Fund
Equity Allocation: Minimum 65% in stocks outside the top 100 by market capitalization
Short Exposure: Up to 25% in mid and small cap equities through derivatives
Structure: Open ended or interval fund
Redemption Frequency: Daily or as decided by AMC
Strategy Focus: Exploit pricing inefficiencies in the broader market beyond large cap stocks
3. Sector Rotation Long Short Fund
Equity Allocation: Minimum 80% in a maximum of four sectors
Short Exposure: Up to 25% at the sector level, through equity derivatives
Structure: Open ended or interval fund
Redemption Frequency: Daily or as decided by AMC
Strategy Focus: Tactical allocation across sectors with both long and short views
B. Debt Oriented Investment Strategies
These strategies provide exposure to fixed income instruments while permitting controlled short positions in debt markets.
1. Debt Long Short Fund
Core Allocation: Across fixed income instruments of various durations
Short Exposure: Permitted via exchange traded debt derivatives
Structure: Interval fund
Redemption Frequency: Weekly or as decided by AMC
Strategy Focus: Interest rate and duration based positioning in debt markets
2. Sectoral Debt Long Short Fund
Allocation: Debt instruments across at least two sectors (not more than 75% in one sector)
Short Exposure: Up to 25% through unhedged derivative positions within a specific sector
Structure: Interval fund
Redemption Frequency: Weekly or as specified by AMC
Strategy Focus: Generate returns through relative value between sectors in the debt market
C. Hybrid Investment Strategies
These multi asset approaches blend equity, debt, and alternatives with active allocation and shorting capabilities.
1. Active Asset Allocator Long Short Fund
Assets Covered: Equity, debt, equity & debt derivatives, REITs/InvITs, commodity derivatives
Short Exposure: Maximum 25% in equity and debt instruments via derivatives
Structure: Interval fund
Redemption Frequency: Twice a week or more frequent, as per AMC’s discretion
Strategy Focus: Dynamic portfolio rebalancing across asset classes based on market conditions
2. Hybrid Long Short Fund
Minimum Equity Allocation: 25%
Minimum Debt Allocation: 25%
Short Exposure: Up to 25% via unhedged derivative positions across both asset types
Structure: Interval fund
Redemption Frequency: Twice a week or more frequent
Strategy Focus: Balanced risk approach across equity and debt with tactical short positioning
Benefits & Risks of SIFs
Specialised Investment Funds (SIFs) provide a unique investment opportunity for experienced investors seeking differentiated strategies. However, they also come with higher complexity and risk, making it important to weigh both advantages and potential drawbacks before investing.
Benefits of SIFs
Access to Differentiated Strategies: SIFs allow investors to participate in advanced investment techniques such as long short equity, tactical asset allocation, and sector rotation, which are not typically available in regular mutual fund schemes.
Diversification Across Asset Classes: These funds can invest across equities, debt, derivatives, REITs/InvITs, and commodities offering broader portfolio diversification beyond standard instruments.
Customised Portfolio Exposure: Investors gain access to focused, high conviction portfolios aligned with specific themes, sectors, or strategies, managed by experienced fund managers.
Potential for Enhanced Returns: Through short selling, dynamic rebalancing, and flexibility in asset allocation, SIFs aim to generate alpha even in volatile or declining markets, subject to market risks.
Risks of SIFs
High Minimum Investment Requirement: A minimum investment of ₹10 lakh is required, restricting access to only high net worth or financially prepared individuals.
Lower Liquidity and Exit Barriers: Redemption windows may be less frequent ranging from daily to quarterly or fixed maturity sometimes with notice periods of up to 15 working days. Exit loads may also apply.
Market and Manager Driven Risk: Like all market linked products, SIFs are subject to equity, interest rate, and credit risks, along with the added dependency on fund manager skill and execution.
Specialised Investment Funds vs Traditional Mutual Funds
While both investment products are regulated by SEBI, Specialised Investment Funds (SIFs) and traditional mutual funds differ significantly in terms of investor eligibility, investment thresholds, liquidity, and strategy flexibility. Here’s a side by side comparison:
Feature
Specialised Investment Funds (SIFs)
Traditional Mutual Funds
Investor Eligibility
Targeted at accredited investors, high net worth individuals (HNIs), and institutional investors
Open to the general public, including retail investors
Minimum Investment
Starts from ₹10 lakh, required at PAN level across SIF strategies
Can begin with as low as ₹100, making it highly accessible
Regulatory Framework
Regulated under SEBI Mutual Fund Regulations (not AIF/PMS) with special provisions for SIFs
Regulated under the SEBI Mutual Fund Regulations
Liquidity
Lower liquidity, with redemption options ranging from daily to quarterly or longer; may include lock in or notice periods quarterly or longer; may include lock in or notice periods
High liquidity through open ended schemes with daily redemptions
Asset Class Flexibility
Can invest in niche and alternative asset classes, including derivatives, REITs, and commodities
Primarily invest in stocks & bonds.
Risk Profile
High, due to use of leverage, short selling, and concentrated strategies
Moderate to high, depending on fund type (equity, debt, etc.)
Return Potential
Potential for higher returns through complex strategies, but with increased volatility and risk exposure
Potential for higher returns through complex strategies, but with increased volatility and risk exposure
Who Should Invest in Specialised Investment Funds?
Specialised Investment Funds (SIFs) are designed for investors who have the financial capacity and market understanding to participate in advanced strategies under a regulated structure. These funds are not intended for all retail investors, especially those seeking short term access or capital protection.
Suitable For:
Investors with surplus capital (10 lakh or more) who are willing to commit for a longer horizon.
Individuals or institutions who understand complex products like derivatives, long short positions, and asset allocation shifts.
Those looking to diversify into non traditional strategies not typically available through regular mutual funds.
Investors who are comfortable with lower liquidity, market fluctuations, and potentially higher volatility.
Conclusion:
Specialised Investment Funds (SIFs) represent a progressive step by SEBI to meet the evolving needs of sophisticated investors seeking more advanced and flexible portfolio strategies. By combining regulatory oversight with the ability to implement complex investment techniques, SIFs bridge a critical gap between traditional mutual funds and higher end products like PMS and AIFs.
However, these funds are not meant for everyone. Their high minimum investment, potential volatility, and relatively lower liquidity make them more appropriate for financially aware individuals with a higher risk appetite and long term perspective. As always, prospective investors should carefully evaluate the risk reward profile, fund manager expertise, and personal financial goals before allocating capital to SIFs.
Frequently Asked Questions:
Q1. What is a Specialised Investment Fund?
A Specialised Investment Fund (SIF) is a SEBI regulated investment scheme launched under the Mutual Fund Regulations (1996), designed to offer high net worth and accredited investors access to strategy driven investments such as long short equity, debt positioning, and hybrid asset allocation. SIFs operate with greater portfolio flexibility than traditional mutual funds and require a minimum ₹10 lakh investment across all strategies of an AMC.
Q2. What is the minimum investment in a SIF?
As per SEBI’s framework, the minimum investment threshold for Specialised Investment Funds (SIFs) is ₹10 lakh per investor, calculated at the PAN level across all SIF strategies offered by a particular Asset Management Company (AMC).
Q3. How are SIFs different from mutual funds?
SIFs are restricted to select investors, invest in alternative assets, and have higher risks and lower liquidity than mutual funds.
Q4. Who can invest in a SIF?
SIFs are primarily meant for investors who can commit a minimum investment of ₹10 lakh, calculated at the PAN level across all SIF strategies within a single AMC. This threshold does not include investments in the AMC’s regular mutual fund schemes. Accredited investors, as defined by SEBI, are exempt from the ₹10 lakh minimum. These funds are best suited for high net worth individuals, institutions, or seasoned investors who understand market complexities and are comfortable with higher risk and lower liquidity.
Q5. Are SIFs liquid?
Not entirely. Liquidity in SIFs depends on the strategy structure open ended SIFs may offer daily or periodic redemptions, while interval and closed ended SIFs often come with longer lock in periods and redemption notice requirements (up to 15 working days). Therefore, investors should be prepared for limited liquidity and delayed exits compared to regular mutual funds.
Q6. What risks should I watch?
Specialised Investment Funds (SIFs) carry market, credit, liquidity, and fund manager specific risks. Since they may invest in niche or less liquid assets and use complex strategies (like short selling), investors should be prepared for higher volatility, longer lock in periods, and performance variability. Always assess whether your financial goals and risk appetite align with such instruments.