Will SIFs help investors?

Experts believe the SIF framework allows portfolio managers to create innovative, tailored products with broader exposure limits. This enables investors to pursue strategies that align with their risk profiles and financial goals.SIFs offer unique opportunities not found in mutual funds, particularly in concentration and thematic approaches, as well as credits.

What are the potential benefits?

Access to innovative sectors, potential for significant capital appreciation, diversification beyond traditional asset classes, and professional management.

What are the associated risks?

In some cases, there is higher volatility, illiquidity, potential for significant capital loss, and limited transparency.

How can I invest in these funds?

Through financial advisors, investment platforms specializing in alternative investments, or direct with fund managers.

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What are SIFs or Specialised Investment Funds?

Archana Chettiar
February 15, 2025

Investing in the right financial instruments is a great way to grow wealth. But with a range of available options, knowing which one is ideal for you can often be tricky. Among the many investment vehicles available, Specialised Investment Funds (SIF) are a popular choice for those looking to diversify their portfolios and make the most of emerging investment trends.

Consider SIFs as tailored investment options for savvy investors ready to explore advanced strategies and diverse asset classes.

This new asset class, which includes mutual funds and PMSes (Portfolio Management Services), will introduce Indian investors to various new investment products and strategies.

SEBI has set a minimum investment bar of ₹10 lakh for SIFs, making it clear that these funds are for those serious about investing. The available range of products now spans mutual fund schemes starting at ₹10, PMSes with a minimum investment of ₹50 lakh, and Alternative Investment Funds (AIFs) requiring at least ₹1 crore. Source: Moneycontrol

In this article, we’ll break down what is SIF investment, their features, and how they work. We’ll also explore how these funds could help your investment journey. So, let’s dive in and understand SIF investment simply and easily.

What is SIF?

Simply put, an SIF (Specialised Investment Fund) is a type of investment fund focusing on a specific asset class, strategy, or market. This new category of funds is designed to offer advanced investment opportunities beyond traditional avenues like equity mutual funds or fixed deposits.

The goal of a SIF is to offer investors an opportunity to gain exposure to specific, often more complex, asset classes that may not be accessible through regular investment vehicles. This can help diversify your portfolio and increase returns, especially if the sector or asset class performs well.

SIF allows investors to diversify their portfolios in a transparent structure. Launching new strategies will follow the same process as mutual funds, with precise details on subscriptions, redemptions, and fees in line with mutual fund regulations.

For instance, a SIF investment might focus on real estate, private equity, or commodities like gold. These are areas that traditional mutual funds may not emphasize as much.

Key Features of SIFs

Diversification of Asset Classes: SIFs expose asset classes typically inaccessible to retail investors, such as real estate, infrastructure, or private debt.
Professional Management: SIFs are managed by experts with deep knowledge of specific sectors, ensuring informed investment decisions.
Regulated Framework: SEBI’s oversight ensures transparency, safeguarding investors from potential malpractices.
Customized Strategies: These funds often employ tailored strategies, including hedging and leverage, to optimize returns.

How SIFs Work

SIFs pool money from multiple investors, similar to mutual funds, but with a clear focus on specific assets. Professionals with expertise in the targeted sector or market then manage the funds. Here’s a step-by-step breakdown of how SIF investment works:

Fund Creation and Structure: A financial institution or asset management company creates the SIF and they define the fund’s specific investment strategy. For example, they might focus on emerging markets or specific asset classes like real estate or technology.
Capital Raising: Like mutual funds, SIFs raise capital by attracting multiple investors. Depending on the fund’s structure and target investor base, this can be done through a public offering or private placements.
Investment Selection: The money raised is invested in the target asset class or market. Fund managers use their expertise to select the best possible opportunities based on the fund’s objectives.
Performance Monitoring: The fund managers closely monitor the fund’s performance and adjust the strategy as needed to maximize returns. They might buy, sell, or hold assets depending on the current market conditions.
Distribution of Returns: The fund will distribute profits to investors according to its structure once the investments generate returns. These returns could come as dividends, capital gains, or interest.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

How SIFs Differ from Traditional Mutual Funds

If you clearly understand “what are mutual funds,” it will be easier to grasp the similarities and differences between SIFs and mutual funds. While both collect funds from investors, their objectives and structures differ.

SEBI’s New Rules for Specialised Investment Funds (SIF)
Feature	SIF	MF
Strategies	Advanced	Standard
Structure	Open, Close, or Interval	Open, Close, or Interval
Minimum Investment	₹10 Lakh across all strategies	Starts from 100
Debt Instruments	<20% per Issuer	<10% per Issuer
Company Ownership	<15% of Company	<10% of Company
Equity Instruments	<10% of the corpus in a single company	Same
REITs/InvITS	<20%, per issuer <10%	<10%, per issuer 5%
Distinct Identity	Separate Building	NA
Tax Benefit	Same	Standard, Eg, Equity Fund, STCG 20%, LTCG 12.5%

Source: LiveMint

Let’s look at the differences between SIFs and Mutual Funds.

Investment Limits and Flexibility

With a minimum investment of ₹10 lakh, Specialised Investment Funds (SIFs) provide asset managers with more flexibility compared to traditional mutual fund schemes. SIFs allow up to 15% allocation in a single security, notably higher than the 10% limit set for mutual funds. For fixed-income strategies, exposure can reach 20% in a single issuer, potentially increasing this limit to 25% with board approval. However, the existing 10% limit for a single issuer remains for traditional fixed-income strategies.

Expense Ratio and Fees

The cost structure for SIFs mirrors that of mutual funds. For example, equity funds can charge a maximum Total Expense Ratio (TER) of 2% for the first ₹250 crore. After that, the cost decreases incrementally—1.75% for the next ₹1,250 crore, 1.60% for amounts between ₹1,500 and 3,000 crore, and so on. Additional expenses can also be charged over the TER.

Increased Investment Limits for REITs and INVITs

A significant change with SIFs is doubling permissible investment limits in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) to 20%. This provides more flexibility in allocation and opens new avenues for diversification. In contrast, the limit for these investments in mutual funds is currently capped at 10%.

SEBI’s ₹10 Lakh Minimum Threshold: What It Means

The decision to set a minimum investment threshold of ₹10 lakh aims to ensure that only informed and financially capable investors participate in SIFs. Here’s why:

Targeting Sophisticated Investors: SIFs involve complex strategies and high risks. A higher threshold ensures participants understand the risks and have sufficient financial backing.
Mitigating Retail Participation Risks: By limiting access to high-net-worth individuals (HNIs) and institutional investors, SEBI protects less-informed retail investors from potential losses.
Encouraging Long-term Investments: The substantial minimum investment promotes a long-term approach, discouraging speculative trading.

Why Invest in SIFs?

Now that we understand the basics of SIF investment let’s explore the reasons for investing in one.

let’s .

Access to Advanced Strategies: Investors gain exposure to sophisticated strategies like arbitrage, hedging, and leverage, which are typically unavailable in traditional funds.
Portfolio Diversification: SIFs allow investors to diversify across unconventional asset classes, reducing reliance on traditional equities and bonds.
Potential for Higher Returns: With advanced strategies and exposure to high-growth sectors, SIFs offer the potential for superior returns over the long term.
Professional Expertise: Experienced fund managers with sector-specific knowledge oversee these funds, enhancing decision-making quality.

Risks Associated with SIFs

While SIFs offer lucrative opportunities, they come with their share of risks:

High Entry Barrier: The ₹10 lakh threshold limits access to wealthy investors, excluding retail investors.
Complex Strategies: Advanced strategies can be challenging to understand, requiring a high level of financial literacy.
Market Volatility: Investments in REITs, InvITs, and private equity are subject to market fluctuations, making them inherently risky.
Illiquidity: Many SIFs have lock-in periods or restrictions on premature exits, reducing flexibility.

If you’re considering making long-term SIF investments, an SIP calculator can help you assess whether you’re on track to meet your target returns.

Should You Invest in SIFs?

Investing in SIFs can be an attractive option if you’re looking to diversify your portfolio and gain targeted exposure to specific markets or asset classes. For many, the key to successful investing lies in understanding the options available, and SIFs provide an exciting opportunity to explore niche markets and emerging sectors.

Lastly, remember that it’s always a good idea to consult a Stock Market Advisory or a financial expert before making significant investment decisions. They can help assess whether a SIF investment aligns with your risk profile and objectives.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Will SIFs help investors?
Experts believe the SIF framework allows portfolio managers to create innovative, tailored products with broader exposure limits. This enables investors to pursue strategies that align with their risk profiles and financial goals.SIFs offer unique opportunities not found in mutual funds, particularly in concentration and thematic approaches, as well as credits.
What are the potential benefits?
Access to innovative sectors, potential for significant capital appreciation, diversification beyond traditional asset classes, and professional management.
What are the associated risks?
In some cases, there is higher volatility, illiquidity, potential for significant capital loss, and limited transparency.
How can I invest in these funds?
Through financial advisors, investment platforms specializing in alternative investments, or direct with fund managers.

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Archana Chettiar

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.