By Suja Sekhar C
A new investment category called the Specialised Investment Fund (SIF) is emerging as an attractive option for middle-class investors looking for higher returns and more sophisticated strategies than traditional mutual funds.
SIFs combine some of the advantages of mutual funds with investment techniques usually associated with Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs). The minimum investment required is ₹10 lakh, making them far more accessible than PMS products, which generally require ₹50 lakh, or AIFs, where the entry threshold is typically ₹1 crore.
After the initial ₹10 lakh investment, investors can continue investing through SIPs starting from ₹1,000. Importantly, SIFs remain under Sebi’s mutual fund regulatory framework.
Financial institutions can launch SIFs through two routes. The first route is for established mutual funds with at least three years of operating history and assets under management (AUM) exceeding ₹10,000 crore.
The second route is for new asset management companies (AMCs). Such firms must appoint a chief investment officer with at least 10 years of investment experience and prior experience managing an average AUM of ₹5,000 crore. In addition, another fund manager with at least three years of experience and experience managing ₹500 crore AUM is also required.
SIFs can adopt equity-oriented, debt-oriented or hybrid investment strategies.
They are allowed to invest in equities and equity-linked instruments while also using derivatives to hedge risks. Derivative instruments such as futures and options help reduce the impact of market volatility on portfolios.
For example, in a simple hedging strategy like a long-short straddle, investors simultaneously buy call and put options.
A call option gives the right to buy shares at a pre-decided price.
A put option gives the right to sell shares at a pre-decided price before a specified expiry date.
If share prices rise sharply, the call option can help investors buy at lower prices. If prices fall, the put option allows them to sell at higher pre-agreed prices.
Such strategies help investors benefit from market upside while protecting portfolios during downturns.
SIFs therefore offer hedge fund-like strategies across multiple asset classes while remaining within a regulated mutual fund structure.
SIFs are permitted to invest up to 15 percent in a single security. They can also allocate up to 20 percent to REITs and InvITs.
In comparison, traditional mutual funds are generally restricted to:
10 percent exposure to a single security
10 percent allocation to REITs and InvITs
This gives SIFs greater flexibility while still maintaining diversification safeguards.
Another advantage of SIFs comes from their mutual fund structure. In PMS products, charges are often linked to individual portfolio performance and profits, which can result in higher and less predictable fees.
In SIFs, expenses are shared equally among investors, similar to mutual funds. The fee structure is transparent and linked to overall fund size.
Typically:
Funds with assets below ₹500 crore may charge around 2.25 percent annually
Expense ratios tend to decline as fund size increases
Since the introduction of the SIF framework, the category has witnessed strong growth.
According to AMFI data, SIF schemes had collected ₹10,620 crore across 14 schemes by the end of March 2026.
Major fund houses offering SIF products include:
Quant Mutual Fund
SBI Mutual Fund
Edelweiss Mutual Fund
Tata Mutual Fund
UTI Mutual Fund
Bandhan Mutual Fund
Despite the growth, the segment faces certain hurdles. One major challenge is the limited number of stocks with sufficient liquidity in both spot and derivatives markets. Another issue is the shortage of professionals skilled in sophisticated short-selling strategies.
Sebi allows SIFs to operate in three formats:
Open-ended funds: Investors can redeem money on a daily basis, similar to regular mutual funds.
Closed-ended funds: Units are issued through New Fund Offers (NFOs) and remain locked in for a specified period. Investors cannot redeem before maturity. However, these funds are listed on stock exchanges, allowing units to be traded at prevailing market prices.
Interval funds: These allow investments anytime, but redemptions are permitted only during specified monthly, quarterly, half-yearly or annual windows. These funds are also listed on exchanges.
The availability of these three structures allows investors to choose schemes based on their time horizon and liquidity requirements.
For instance, investors who do not require immediate access to their money may prefer closed-ended funds, allowing investments to remain locked in for longer periods and potentially benefit from long-term strategies.
(The author is with State Bank Staff College Hyderabad)
