The Securities and Exchange Board of India (SEBI) has introduced a framework for a new type of investment product known as the Specialized Investment Fund (SIF). This category is intended to serve as a middle ground between Mutual Funds (MFs) and Portfolio Management Services (PMS). The new framework is scheduled to be implemented from April 1, 2025.
The Sebi stated that the SIF is structured to provide investors with increased portfolio flexibility as compared to conventional mutual funds, while still ensuring regulatory supervision.
Niranjan Avasthi, Senior Vice President, Edelweiss Mutual Funds, said: "A New Era in the Mutual Fund Industry has begun with the Introduction of Specialized Investment Funds (SIF). The SIF is crafted to provide enhanced portfolio flexibility in comparison to conventional mutual funds, all while upholding regulatory supervision."
CA Nitin Kaushik said: "SIP works when stocks go up, but what if they fall? SIF (Specialised Investment Fund) makes money even in a market crash. Unlike mutual funds that can only buy, SIF can buy, sell & short-sell."
Deepak Gokul G S, Chief Financial Planner at Wealth Forever, said: "SIFs (Specialised Investment Funds) differ from mutual funds by requiring a ₹10 lakh minimum investment (vs. Rs 100), allowing "advanced" strategies, and permitting higher concentration in single investments."
Key features of investment strategies introduced:
A) Equity-Oriented
1. Equity Long-Short Fund
• Invests at least 80% in equity
• Allows up to 25% shorts via derivatives.
2 .Equity Ex-Top 100 Long-Short Fund
• Invests at least 65% in stocks outside the top 100 by market cap.
• Allows up to 25% short exposure in non-large-cap stocks via derivatives.
3 .Sector Rotation Long-Short Fund
• Invests at least 80% in up to 4 sectors.
• Allows up to 25% short exposure at the sector level.
B) Debt-Oriented
1. Debt Long-Short Fund • Invests across different debt instruments. • Allows short exposure via exchange-traded debt derivatives. • Redemption: min Weekly or as per AMC.
2. Sectoral Debt Long-Short Fund • Invests in debt instruments across at least 2 sectors (max 75% in one sector).
• Allows up to 25% short exposure at the sector level.
• Redemption: Weekly or as per AMC.
C) Hybrid Investment Strategies
• Dynamically invests in equity, debt, REITs/InVITs, and commodity derivatives.
• Allows up to 25% short exposure
• Redemption: Twice a week or as per AMC.
2. Hybrid Long-Short Fund
• Minimum 25% investment in both equity and debt instruments.
• Allows up to 25% short exposure via derivatives.
• Redemption: Twice a week or as per AMC.
Other Key Provisions for Specialized Investment Funds (SIF)
1. Minimum Investment Threshold • Investors must invest at least ₹10 lakh across all investment strategies at the PAN level. • This minimum does not apply to accredited investors. • SIP, SWP, and STP options are allowed, but total investment must meet the threshold. • Active breaches (due to investor actions) are not allowed; passive breaches (due to NAV decline) allow only full redemption.
2. Investment Restrictions • Single Issuer Limits (Debt & Money Market): • AAA-rated: Max 20% of NAV • AA-rated: Max 16% of NAV • A & Below: Max 12% of NAV • Sector Limit (Debt & Money Market): Max 25% of NAV in a single sector.
3. Subscription & Redemption of Units • Can be open-ended, close-ended, or interval-based. • Redemption & subscription frequencies can differ (e.g., daily subscriptions, weekly redemptions). • Notice periods for redemption are allowed, max 15 working days.
4. Listing of Units • Close-ended & interval funds must be listed on stock exchanges. • Funds with non-daily redemption are classified as “Interval Investment Strategies”.
5. Benchmarking of Investment Strategies • SIFs must follow a single-tier benchmark structure (with an optional second-tier). • Equity funds: Benchmarked against indices like Nifty, Sensex, BSE 100, CRISIL 500. • Debt funds: Benchmarked against suitable broad market indices.
6. Distribution of SIFs • Distributors must pass NISM Series-XIII: Common Derivatives Certification to sell SIFs.
7. Disclosure Requirements • Offer documents must detail redemption rules, derivative exposure, and liquidity risks. • Portfolio disclosure every alternate month (May, July, etc.), including derivative positions. • Scenario analysis to show potential losses due to market movements.
8. Risk-Band System • Risk levels assigned at fund launch and reviewed monthly. • Five risk levels:
1. Lowest Risk 2 .Risk Level 2 3 .Risk Level 3 4 .Risk Level 4 5. Highest Risk
9. SIF to have distinct branding. AMC brand can be written along with new brand.