What is SIF (Specialised Investment Fund)?

5paisa Research Team

Last Updated: 22 Jan, 2025 03:57 PM IST

What is SIF(Specialised Investment Fund) introduced by SEBI
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The Indian investment landscape is evolving with the introduction of a new investment vehicle: the Specialised Investment Fund (SIF). While mutual funds have long been a trusted investment option, offering diversification and professional management, they often lack the level of personalization that some investors seek. On the other hand, Portfolio Management Services (PMS) provide a more tailored approach but come with higher minimum investment requirements. 

To address this gap, the Securities and Exchange Board of India (SEBI) has introduced SIFs, offering investors a flexible and innovative investment option that combines the best features of both mutual funds and PMS. Let’s explore what Specialized Investment Funds are and how SIFs can benefit investors.
 

What are SIFs going to offer investors?

SIFs bring a wide range of offerings for investors:

  • Flexible Structures: Asset management companies (AMCs) can implement advanced investment strategies using open-ended, closed-ended, or interval structures.
  • Bridging the Gap: Addressing the lack of products between MFs and PMS, SIFs discourage investors from turning to unregulated schemes.
  • Minimum Investment Threshold: A minimum investment of ₹10 lakh is required, except for accredited investors who enjoy specific exemptions.
     

What are the features of SIF?

The Specialised Investment Fund is characterized by distinct features like:

  • Higher Allocation Limits: Up to 15% allocation in a single security, compared to the 10% cap in mutual funds. Fixed-income strategies can invest up to 20% of their assets in a single issuer, with the option of increasing to 25% with board approval.
  • Expanded REIT and INVIT Investments: Limits for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) are doubled to 20%.
  • Transparency: SEBI mandates clear difference from mutual funds, including distinct branding and strong risk controls.
  • Innovation Potential: AMCs can design specialized products tailored to unique investor goals and risk tolerance.
     

What is the risk mitigation of SIF?

SEBI has incorporated rigorous risk mitigation strategies into the SIF framework:

  • Exposure Limits: To reduce concentration risks, SIFs cap allocations to individual issuers, companies, and sectors. The 15% allocation limit in equity and 20%-25% in fixed income ensure portfolio diversification.
  • Regulatory Oversight: SEBI enforces transparency through detailed disclosures, ensuring investors are well-informed about the risks.
  • Accredited Investors: Exemptions for accredited investors come with a higher level of due diligence and risk acknowledgment.
  • Flexible Structures: Open-ended and closed-ended options allow fund managers to align investment horizons with risk levels, balancing potential returns and associated risks.

These measures collectively safeguard investor interests while allowing for innovative and higher-risk investment strategies.
 

Difference between SIF and Mutual Funds

While mutual funds and PMS cater to different investor segments, SIFs bridge the gap by offering a middle ground.

Here are the key differences:

  • Investment Threshold: SIFs require a minimum of ₹10 lakh, compared to PMS that need ₹50 lakhs. Mutual funds on the other hand come with much lower entry points. 
  • Allocation Limits: SIFs allow up to 15% allocation to a single security, higher than mutual funds’ 10% cap. Fixed-income strategies in SIFs offer even greater flexibility.
  • Cost Structure: The expense ratio of SIFs aligns with mutual funds, with tiered charges based on fund size.
  • REIT and INVIT Investments: SIFs permit 20% investment in these instruments which is double the limit allowed in mutual funds.
     

Who is SIF for?

The Specialised Investment Fund is designed for:

  • High-Net-Worth Individuals (HNIs): Tailored for experienced investors with significant capital and a higher risk appetite.
  • Advanced Investors: Those seeking sophisticated strategies and broader exposure limits.
  • Portfolio Managers: SIFs enable managers to create customized products that traditional mutual funds cannot accommodate.

By empowering portfolio managers, SIFs align with investors’ unique financial goals and risk profiles, making them ideal for those seeking diversification and innovation.
 

Benefits of Specialised Investment Fund by SEBI

Here are the advantages of SIFs:

  • Access to Unique Opportunities: SIFs unlock specialized strategies unavailable in traditional investments.
  • Potential for Higher Returns: With a focused approach and higher risk profile, SIFs may help to gain better returns.
  • Portfolio Diversification: Investors gain exposure to uncorrelated asset classes and innovative strategies.
  • Professional Management: Managed by seasoned experts, SIFs leverage deep market expertise.

These benefits make SIFs an attractive choice for investors seeking advanced options and higher returns.
 

Conclusion

The introduction of SIFs by SEBI marks a significant evolution in India’s investment landscape. By bridging the gap between mutual funds and portfolio management services, SIFs offer advanced strategies, flexibility, and professional management. While higher risks are inherent, stringent regulatory measures ensure a balanced approach. SIFs stand out as a promising opportunity for HNIs and seasoned investors seeking diversification and innovation in their portfolios.
 

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Frequently Asked Questions

SIF is a new investment category by SEBI, designed for high-risk investors, combining the flexibility of PMS and the affordability of mutual funds.
 

Yes, SIFs offer higher allocation limits and customizable strategies, providing greater flexibility compared to mutual funds.

SIFs operate with a minimum investment of ₹10 lakh, allowing AMCs to implement innovative strategies within SEBI’s risk-controlled framework.

 SIFs allow advanced strategies like increased exposure limits, specialized fixed-income allocations, and potential future inclusion of derivatives.

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