The Securities and Exchange Board of India (SEBI) has introduced a new investment category dubbed the 'specialised investment fund' (SIF) designed for wealthier investors. This initiative, effective from April 1, requires a minimum investment of Rs 10 lakh. SEBI's move aims to cater to investors with higher risk appetites while providing asset managers with over three years of operational history the opportunity to offer diverse investment strategies under this new category. These funds are positioned between traditional portfolio management services and mutual funds.
To establish an SIF, mutual funds must have at least a three-year track record and maintain an average asset under management (AUM) of no less than Rs 10,000 crore over the preceding three years.
Moreover, SEBI has mandated that no regulatory action should have been taken against the sponsor or the asset management company (AMC) under relevant SEBI Act sections in the past three years. Alternatively, an AMC can appoint a Chief Investment Officer (CIO) with at least ten years of fund management experience, overseeing an average AUM of not less than Rs 5,000 crore. A secondary fund manager with three years of experience handling an AUM of at least Rs 500 crore is also required.
SEBI has outlined three investment strategies for SIFs: equity-oriented, debt-oriented, and hybrid investment strategies. Equity-oriented strategies include the Equity Long-Short Fund, requiring at least an 80% investment in equity and related instruments, with a maximum short exposure of 25% through unhedged derivatives.
Additionally, the Equity Ex-Top 100 Long-Short Fund and Sector Rotation Long-Short Fund are also part of this category, focusing on investments excluding the top 100 stocks and specific sectors, respectively.
Debt-oriented strategies offered under SIFs include the Debt Long-Short Fund, which invests across debt instruments and allows short exposure through exchange-traded debt derivatives. Meanwhile, the Sectoral Debt Long-Short Fund allocates investments across at least two sectors, with a single sector limit set at 75%. Both strategies permit a maximum short exposure of 25% in unhedged derivative positions.
Hybrid investment strategies within the SIF framework include the Active Asset Allocator Long-Short Fund and the Hybrid Long-Short Fund. The former allows dynamic investments across various asset classes, with a short exposure cap of 25% on unhedged positions. The latter requires a minimum investment of 25% in both equity and debt instruments, maintaining the same short exposure limit. Redemption frequencies differ between funds, with options ranging from daily to weekly, depending on the AMC's discretion.
The implementation of SIFs is further supported by the Association of Mutual Funds in India (AMFI), which is tasked with issuing necessary guidelines by March 31, 2025. SEBI has directed stock exchanges, clearing corporations, and depositories to prepare the systems required for this new category. This development marks a significant step in diversifying investment avenues for wealthy individuals while ensuring that stringent eligibility and operational criteria are met by participating mutual funds.