What Are Specialised Investment Funds (SIF)? A Simple and Complete Guide

In recent times, the world of investing in India has seen some exciting changes. One of the biggest updates came from the Securities and Exchange Board of India (SEBI), the body that regulates the stock markets and investment products. In early 2025, SEBI introduced a brand new type of investment option called Specialised Investment Funds, or SIFs for short. This new category started working fully from April 1, 2025. Many people wonder what these funds are all about and why they matter. In simple words, SIFs are designed to fill a gap that has existed for a long time between regular mutual funds and something more advanced like Portfolio Management Services (PMS).

Think about it this way: Regular mutual funds are great for most people. They are easy to understand, have low entry amounts (sometimes just ₹500 to start), and come with strict rules that keep risks in check. Anyone can invest in them, from beginners to experts, and they offer good diversification. On the other hand, PMS is meant for very wealthy people who want custom-made portfolios. In PMS, a professional manager handles your money separately, often with a minimum investment of ₹50 lakhs or more. It gives a lot of freedom but comes with higher costs and fewer protections.

SIFs sit right in the middle. They give more flexibility than normal mutual funds but still have the safety net of SEBI rules, just like mutual funds. They are not as personalized as PMS, but they allow fund managers to try smarter and more focused strategies. This makes SIFs perfect for investors who have some experience, a decent amount of money to invest, and are okay with taking a bit more risk for possibly better returns.

Why Did SEBI Create Specialised Investment Funds?

SEBI noticed that many investors, especially those with high net worth (called HNIs or High Net-Worth Individuals), wanted more options. Regular mutual funds have too many restrictions – for example, they can’t invest heavily in just a few stocks or use complex tools like derivatives in aggressive ways. At the same time, jumping straight to PMS felt too big a step for some because of the high costs and individual handling.

By introducing SIFs, SEBI wanted to bring innovation to the mutual fund world. It allows asset management companies (AMCs) like Kotak Mutual Fund, HDFC Mutual Fund, or others to launch schemes that focus on specific strategies. These could be things like long-short equity (buying some stocks while betting against others), investing in smaller companies outside the top 100, or using debt in creative ways. The goal is to help experienced investors grow their money in smarter ways while keeping things transparent and regulated.

This change came after a lot of discussions and consultations with the industry. SEBI released a circular in February 2025 explaining the full framework, and by April, AMCs could start applying to launch these funds.

Key Features of Specialised Investment Funds

Let’s break down what makes SIFs different in easy points:

1. Minimum Investment Amount: You need at least ₹10 lakhs to invest in an SIF. This is much higher than regular mutual funds. Why? Because these funds are for people who understand investing better and can handle ups and downs. Accredited investors (those with very high income or net worth) might get some relaxations, but for most, it’s ₹10 lakhs across all strategies from one AMC.
2. Who Can Launch Them?: Not every company can offer SIFs. The AMC must be experienced – they should have been in business for at least three years and manage a good amount of money (average AUM of ₹10,000 crore or more in some cases). They also need a Chief Investment Officer (CIO) with at least 10 years of experience handling large funds, and other fund managers with solid track records. This ensures only capable teams handle your money.
3. Types of Strategies: SIFs can follow equity-oriented (mostly stocks), debt-oriented (bonds and loans), hybrid (mix of both), or even interval strategies. They can use derivatives, take short positions (up to certain limits), invest in REITs (real estate trusts), or focus on niche areas. For example, a long-short strategy might buy undervalued stocks and sell overvalued ones to make money even if the market falls.
4. Redemption and Liquidity: Unlike daily redemption in most mutual funds, SIFs can have limits. Some might allow withdrawals daily, others weekly, monthly, or only during specific intervals. There could be lock-in periods or exit loads to discourage quick in-and-out.
5. Risk Rating and Disclosures: Every SIF will have a risk level from 1 to 5, with detailed explanations of worst-case scenarios. This helps investors know exactly what they are getting into.
6. Exposure Limits for Safety: Even with more freedom, there are guards. For example, no more than 10% in one company’s stocks or 20% in debt from one issuer (depending on credit rating). Gross exposure, including derivatives, can’t go beyond certain percentages of the fund’s assets.

These features make SIFs more exciting but also more thoughtful than plain vanilla mutual funds.

How Do SIFs Compare to Mutual Funds, PMS, and AIFs?

To understand better, here’s a simple comparison:

• Regular Mutual Funds: Low minimum (₹100-₹500), daily liquidity, strict rules, lower risk, suitable for everyone. Taxation like mutual funds.
• SIFs: ₹10 lakh minimum, limited liquidity, more flexible strategies, medium to high risk, for experienced investors. Still taxed like mutual funds, which is an advantage over others.
• Portfolio Management Services (PMS): ₹50 lakh minimum, fully customized portfolio, high fees, separate account for each investor, higher risk possible.
• Alternative Investment Funds (AIFs): Often for private equity, venture capital, or hedge funds; higher minimums, less liquidity, different tax treatment.

SIFs borrow the pooled structure and transparency from mutual funds but add the strategy depth closer to PMS. Many experts call it a “mutual fund on steroids” for sophisticated investors.

Benefits of Investing in Specialised Investment Funds

There are several good reasons why SIFs are gaining attention:

• More Flexibility for Fund Managers: Managers can concentrate on high-conviction ideas, use hedging tools, or explore unique opportunities that regular funds can’t.
• Potential for Higher Returns: With focused strategies, these funds might outperform plain index or diversified funds, especially in specific market conditions.
• Professional Management with Guardrails: You get expert handling but within SEBI’s protective rules – better than unregulated options.
• Diversification in New Ways: Access to strategies like long-short (which can protect in falling markets) or sector-specific plays.
• Tax Advantages: Treated like mutual funds for taxation – equity SIFs get long-term capital gains benefits if held over a year.
• Transparency: NAV declared regularly, just like mutual funds, with clear disclosures.

For someone who has maxed out regular mutual funds and wants the next level without going full PMS, SIFs can be a smart step.

Risks and Things to Watch Out For

No investment is without downsides, and SIFs have their share:

• Higher Risk: Strategies can be complex, involving derivatives or concentrated bets. Markets can be volatile, and you might lose money.
• Lower Liquidity: You can’t always redeem anytime. If you need money urgently, this could be a problem.
• Higher Fees: Management fees might be more than regular mutual funds because of the specialized work involved.
• Not for Beginners: If you are new to investing or can’t afford to lose the ₹10 lakh, stay away. These are for people comfortable with market cycles.
• Market and Strategy Risks: Long-short might not work if markets behave unusually. Debt strategies could face credit risks.

Always read the Investment Strategy Information Document (ISID) carefully – it’s like the scheme document but tailored for each strategy.

Who Should Consider Specialised Investment Funds?

SIFs are best for:

• High net-worth individuals with investable money above ₹10 lakhs.
• Investors who have experience with mutual funds and understand risks.
• Those looking for long-term growth (5-10 years or more).
• People okay with moderate to high volatility.

If you are saving for retirement, child’s education, or building wealth and want something beyond basic funds, talk to a financial advisor about SIFs.

SBI has already launched Magnum SIF. Many AMCs have applied or launched SIFs. This is a positive step for India’s investment market. It brings more choices, encourages innovation, and helps channel money into efficient strategies. Over time, as more people learn about them, SIFs could become a popular choice for savvy investors.

FAQs

Q1.What constitutes a Specialized Investment Fund (SIF)?

A SIF is an investment fund that strategically and professionally allocates resources across various assets.

Q2. Are SIFs beneficial for newcomers?

They may appear somewhat complex to novice investors, so it’s advisable to comprehend them and seek guidance prior to investing.

Q3. What distinguishes SIFs from mutual funds?

Mutual funds offer simplicity, whereas SIFs provide greater flexibility, more complex strategies, and are designed for specific investors.

Q4. Is it simple to leave a SIF?

Numerous SIFs impose a lock-in period, making instant withdrawals sometimes unattainable.

Q5. Who ought to think about putting money into SIFs?

Individuals with a strong tolerance for risk seeking long-term, diverse investment opportunities.

Q6. Are SIFs subject to regulation in India

Yes, SIFs are regulated by SEBI regulations in India.

Conclusion

In conclusion, Specialised Investment Funds are an exciting addition that makes investing more interesting for those ready for it. They combine the trust of mutual funds with advanced tactics, all under SEBI’s watch. If this sounds like something for you, do your homework, assess your risk appetite, and perhaps start exploring options from trusted AMCs.

Specialized Investment Funds (SIFs) have emerged as a robust choice for investors looking for diverse, strategic, and expertly managed options outside of conventional investments. Selecting the appropriate SIF relies on your risk tolerance, investment timeframe, and financial objectives. Although SIFs necessitate knowledge and diligence, a proper strategy along with a seasoned fund manager can offer enduring stability and support to a portfolio.

Remember, all investments carry risk, including the possible loss of principal. Past performance doesn’t guarantee future results. Consult a professional before investing.