What is SIF Blog Details

Blog›Details

Specialised Investment Funds (SIFs)

Blog Image

The SEBI Framework Explained

Specialised Investment Funds (SIFs) are a new SEBI-regulated investment category introduced from April 1, 2025, to bridge the gap between traditional mutual funds and Alternative Investment Funds (AIF) + Portfolio Management Services (PMS). They allow eligible asset management companies (AMCs) to offer more flexible, strategy-driven portfolios while remaining within the mutual fund regulatory framework. SIFs require a minimum investment of ₹10 lakh per investor, though accredited investors are exempt.

The framework permits advanced strategies such as equity long-short, sector rotation, active asset allocation, hybrid, and debt long-short investing. Unlike conventional mutual funds, SIFs can take limited unhedged derivative positions, enabling more sophisticated portfolio management. SEBI has also prescribed strict eligibility criteria for AMCs, portfolio concentration limits, disclosure standards, separate branding, and enhanced risk classification to improve transparency and investor protection.

SIFs are best suited for experienced investors seeking greater flexibility than mutual funds without the higher ₹50 lakh entry requirement of PMS or the ₹1 crore minimum investment requirement for AIFs. However, they carry higher risks, including market volatility, liquidity constraints, derivatives exposure, and strategy execution risk. Investors should carefully review the Investment Strategy Information Document (ISID) and ensure the strategy aligns with their financial goals and risk tolerance before investing.

What Are Specialised Investment Funds (SIFs)? The SEBI Framework Explained

SEBI introduced specialised investment funds in April 2025, designed to sit between traditional mutual funds and portfolio management services. For investors who have outgrown standard fund structures but find PMS thresholds prohibitive, understanding what a SIF is and how the framework operates is worth your time. Learn what these funds are and how they function with our comprehensive guide.

What Is a Specialised Investment Fund?

A specialised investment fund (SIF) is a SEBI-regulated investment category, effective April 1, 2025. It was introduced under amendments to the SEBI (Mutual Funds) Regulations, 1996. It allows asset management companies (AMCs) to offer strategy-driven schemes with greater portfolio flexibility than conventional mutual funds. The SIF does not replace mutual funds but operates alongside them under the same AMC, with a separate regulatory treatment. SEBI uses the term "investment strategy", not "scheme", for products launched within this framework.

Why SEBI introduced SIFs:

  • To bridge the gap between mutual funds and AIF & PMS
  • To provide a regulated alternative for investors seeking sophisticated strategies
  • To reduce the gravitational pull of unregistered, unauthorised investment entities

Minimum investment threshold:

  • ₹10 lakh per investor, measured at the PAN level across all SIF strategies within one AMC
  • This threshold applies exclusively to SIF investments and does not include regular mutual fund investments with the same AMC
  • Accredited investors are exempt from this minimum

The SEBI Regulatory Framework for SIFs

SEBI's regulatory framework for SIFs was published via circular dated February 27, 2025, and came into force on April 1, 2025. AMFI was directed to issue operational guidelines by March 31, 2025.

AMC Eligibility: Two Routes

Route 1: A Good Track Record:

  • Mutual fund in operation for at least three years
  • Average AUM of not less than ₹10,000 crore in the preceding three years
  • No regulatory action initiated or taken under Section 11, 11B, or 24 of the SEBI Act during the last three years

Route 2: Alternate Route:

  • CIO for SIF must have a minimum of 10 years of fund management experience and have managed average AUM of at least ₹5,000 crore
  • An additional fund manager with at least 3 years of fund management experience and average AUM of ₹500 crore
  • Same regulatory clean-record requirement as Route 1 applies

Portfolio and Concentration Limits

SEBI has set defined investment limits for SIF strategies:

  • Maximum 20% of NAV in AAA-rated debt and money market securities from a single issuer
  • Maximum 16% in AA-rated securities from a single issuer
  • Maximum 12% in securities rated A and below from a single issuer
  • These limits may be extended by up to 5% with prior approval from fund trustees and AMC board
  • Maximum 25% of NAV in debt and money market securities of any one sector SIFs may hold up to 25% of net assets in unhedged, exchange-traded derivative positions for non-hedging purposes, a feature not available in traditional mutual funds.

Branding and Disclosure Requirements

SEBI requires SIFs to maintain distinct brand identities:

  • Separate brand name, logo, and dedicated website or webpage
  • For the first five years, the sponsor or mutual fund brand name may appear in communications, but must be accompanied by phrases such as "brought to you by" or "offered by"
  • SIF brand name in promotional materials must be equal to or larger in size than the mutual fund brand name
  • Portfolio disclosure on alternate months, within 10 days of month close
  • NAVs disclosed by 11:00 PM on the same business day (T day)
  • Risk classified into five bands (Risk Band 1 to 5), reviewed monthly

Investment Strategies Permitted Under SIF

SEBI has approved seven subcategories of investment strategy under three broad categories. Only one strategy per subcategory is permitted per AMC.

Equity-Oriented Strategies

1. Equity Long-Short Fund: Invests a minimum of 80% in equity and equity-related instruments. Allows both long and short positions, with unhedged derivative exposure up to 25% of net assets. Designed for investors seeking equity returns alongside active downside risk management through short positioning.

2. Equity Ex-Top 100 Long-Short Fund: Focuses on stocks outside India's top 100 companies by market capitalisation. Targets mid- and small-cap segments where market inefficiencies may be more pronounced. Also permits short positions via derivatives up to 25% of net assets.

3. Sector Rotation Long-Short Fund: Tactically allocates across a maximum of four sectors based on the fund manager's market outlook. Combines long positions in favoured sectors with short positions via derivatives, with sector concentration limits applying as per SEBI norms.

Debt-Oriented Strategies

4. Debt Long-Short Fund: Invests in debt instruments across different durations. Allows unhedged positions in exchange-traded debt derivatives. Structured as an interval fund with a redemption frequency of once a week or less. Carries risks around interest rate movements, credit defaults, and reinvestment yields.

5. Sectoral Debt Long-Short Fund: Concentrates on debt instruments within specific sectors. Minimum of two sectors in the portfolio, with a maximum of 75% in any single sector. Maximum naked derivative position of 25% in debt instruments held in the portfolio. Also an interval fund structure.

Hybrid Strategies

6. Active Asset Allocator Long-Short Fund: Provides broad flexibility to dynamically rebalance across asset classes, including equity, debt, equity and debt derivatives, REITs/InvITs, and commodity derivatives. Maximum 25% unhedged derivative exposure across equity and debt. Structured as an interval fund with a redemption frequency of twice a week or less. This is the closest to a dynamic asset allocation strategy within the SIF framework.

7. Hybrid Long-Short Fund: Maintains a minimum of 25% each in equity and debt instruments. Allows tactical short positioning and rebalancing across asset classes. Structured as an interval fund. Designed for investors seeking multi-asset exposure with active risk management built in.

Check out our investor education program to make informed decisions Visit Now.

How SIFs Differ from Mutual Funds and PMS

Parameter Mutual Funds SIF PMS
Minimum Investment As low as ₹500 (SIP) ₹10 lakh (PAN level) ₹50 lakh
Regulator SEBI SEBI SEBI
Short Positions Not permitted Up to 25% via derivatives Permitted
Dynamic Allocation Strategy-specific Permitted across strategies Full flexibility
Regulatory Framework MF Regulations MF Regulations (distinct licence) PMS Regulations
Pooled / Segregated Pooled Pooled Segregated
Disclosure Standards High High (alternate monthly portfolio) Moderate

SIFs are not a substitute for PMS; they are a regulated middle ground offering more strategy flexibility than mutual funds at a lower minimum ticket than PMS.

Who Are SIFs Suited For?

Branding and Disclosure Requirements

SEBI specialised investment funds are generally relevant for:

  • Those who meet the ₹10 lakh minimum and are prepared for higher risk relative to conventional mutual funds
  • Experienced investors comfortable with derivatives exposure, long-short positioning, and interval-based liquidity
  • Investors evaluating dynamic asset allocation through an actively managed, multi-asset framework
  • Investors seeking regulated alternatives to unregistered investment schemes or unauthorised portfolio products

SIFs carry relatively higher risk than traditional mutual funds, including potential capital loss, liquidity constraints, and market volatility. Investors should review the investment strategy information document (ISID) for each strategy before committing capital.

Learn what the benefits of specialised investment funds (SIFs) are with our blog! Read More

Key Risks to Understand Before Investing

  • Market risk: SIF returns are market-linked and not guaranteed. Long and short positions can both generate losses simultaneously depending on market conditions.
  • Liquidity risk: Interval fund structures have fixed redemption windows. Investors must be prepared for periods of restricted access to capital.
  • Execution and strategy risk: Complex strategies such as sector rotation and long-short equity depend on fund manager judgement. Poor timing or incorrect positioning can result in underperformance.
  • Derivatives risk: Unhedged positions in derivatives amplify both potential gains and losses relative to a long-only portfolio.
  • Limited performance history: As a category launched in April 2025, SIFs carry no long-term track record. Evaluation must rely on strategy design, fund manager credentials, and backtested data where disclosed.

Conclusion

Specialised investment funds represent a structurally distinct category within India's regulated investment space. Under SEBI's framework, they give eligible AMCs the tools to construct strategy-driven portfolios, long-short equity, active asset allocation, sector rotation, and hybrid approaches within a disclosure and governance structure aligned with mutual fund standards. For investors who understand the strategies involved, meet the ₹10 lakh threshold, and are prepared for the risk profile these instruments carry, SIFs are worth evaluating as part of a broader portfolio framework. As with any market-linked investment, outcomes depend on strategy execution and market conditions, and careful review of fund-level documents remains essential.

Read more similar blogs at Sundaram Knowledge Hub Learn more

Frequently Asked Questions

A Specialised Investment Fund (SIF) is a SEBI-regulated investment category, effective April 1, 2025, that allows AMCs to offer strategy-driven schemes with greater portfolio flexibility than conventional mutual funds. SIFs can use long-short positions, sector rotation, and dynamic asset allocation. They operate under the mutual fund regulatory framework but with a separate licence, a distinct brand identity, and a minimum investment of ₹10 lakh at the PAN level.

The minimum investment threshold is ₹10 lakh per investor, measured across all SIF strategies offered by the same AMC at the PAN level. This threshold applies only to SIF investments and does not include the investor's regular mutual fund holdings with the same AMC. Accredited investors, as defined by SEBI, are exempt from this minimum requirement.

SIFs are regulated under the SEBI (Mutual Funds) Regulations, 1996, as amended effective December 16, 2024. The operational framework was set out in SEBI's circular dated February 27, 2025, and came into effect on April 1, 2025. While SIFs operate within the mutual fund structure, they hold a distinct licence, maintain a separate brand, and are subject to additional disclosure and risk classification requirements specific to this category.

Under the Active Asset Allocator Long-Short Fund strategy, fund managers can dynamically rebalance across equity, debt, REITs/InvITs, and commodity derivatives, adjusting allocations in response to market conditions and economic outlook. Unhedged derivative exposure is permitted up to 25% of net assets. This structure gives the fund manager considerably more flexibility to respond to changing market cycles compared to a fixed-allocation mutual fund.

Yes. SIFs can hold up to 25% of their net assets in unhedged, exchange-traded derivative positions for non-hedging purposes. This applies across equity-oriented, debt-oriented, and hybrid strategies, within the limits specified per strategy. Hedged derivative positions can go up to 100% of net assets where strategy mandates permit. This derivatives flexibility is a defining characteristic of SIFs and does not apply to traditional mutual fund schemes.

SIFs are positioned for experienced investors, HNIs, and institutions who are comfortable with higher-risk, strategy-driven investment approaches and can meet the ₹10 lakh minimum threshold. They carry relatively higher risk than conventional mutual funds, including potential capital loss, liquidity constraints during interval windows, and market volatility. Investors should carefully review the Investment Strategy Information Document (ISID) and assess alignment with their financial goals and risk profile before investing.