Synopsis– A new entrant in the mutual fund industry in India is Specialized Investment Funds (SIFs), which SEBI introduced through amendments in December 2024 and implemented on April 1, 2025. SIFs are supposed to target the higher end investor and offer long-short equity positions, derivative exposures and multi-asset allocations with minimum investments of ₹10 lakh.
Introduction to SIFs
On December 16, 2024, SEBI revised the Mutual Fund Regulations that opened the way to SIFs. SIFs take the form of mutual fund trusts supervised by trustees, AMCs and custodians as per SEBI regulative provisions. Two notable early entrants:
- In September 2025, Quant Mutual Fund declared its plans to launch a QSIF Equity Long-Short strategy.
- In early September 2025, Bandhan AMC received a green light from SEBI to roll out its “Arudha SIF” platform, with equity and debt, and hybrid strategies, including unhedged short derivative positions.
Target clients include institutional clients, HNIs, ultra-HNIs and institutional participants seeking different risk-return profiles than conventional funds.
Why SIFs Now?
PMS generally requires a minimum investment of ₹50 lakh and AIFs typically require ₹1 crore, which means investors with ₹10-50 lakh are underserved. SIFs fill this gap. As the markets deepen, investors require a more dynamic, hedged, multi-asset approach that is not available in a standard mutual fund product. Unlike unregulated alternatives, SIFs offer advanced strategies within a trusted SEBI framework.
How Do SIFs Work?
- Structure: SIFs are based on the mutual fund trust format, which provides protection to the investors and is governed by SEBI.
- Strategy flexibility: SIFs permit only a single strategy in a category (equity long-short, ex-top 100 long-short, sector rotation long-short, debt long-short, hybrid, etc.).
Key permissible exposures (depending on the ISID of each fund)-
- Unhedged short derivative positions: up to 25% of net assets.
- Debt and money-market investments: limited to 25% NAV per sector; issuer restrictions (20% AAA, 16% AA, 12% A and below).
- REITs/InvITs: funds can invest according to scheme ISID allowances (more than standard MFs).
- Redemption frequency: may be any of the following: daily, weekly, monthly, interval or fixed maturity; up to 15 working days notice is allowed.
- Disclosure: SIFs mandate scenario analysis, risk-bands, and portfolio disclosure every two months. interval/closed-ended SIFs units have to be listed on exchanges.
Also read: Top Mutual Funds for Salaried Professionals in Their 20s – Are You Investing in the Right One?
SIFs vs Mutual Funds vs PMS vs AIFs
| Feature | Mutual Funds | PMS | AIFs | SIFs |
| Min. Investment | ₹100–₹5,000 | ₹50 lakh | ₹1 crore | ₹10 lakh |
| Strategy Flexibility | Limited | Highly Customized | Very High | Moderate–High (1 strategy per category) |
| Regulation | Strict (SEBI) | Moderate | Less regulated | Strict (SEBI MD Rules) |
| Liquidity | Daily NAV | Moderate | Low | Varies (daily to interval) |
| Transparency | High | Moderate | Low | Moderate–High |
| Fees | 1–2.5% expense ratio | Fees + performance | Higher fees | May include management + performance |
| Regulation Structure | Mutual Fund Trust | Proprietary | AIF structure | Mutual Fund Trust (enhanced flexibility) |
Benefits of SIFs
- Strategic diversification: Across equities, debt, REITs/InvITs, and derivatives.
- Advanced strategies: Long-short, sector rotation, and hybrid asset models.
- Potential for risk-adjusted returns: Flexible positioning can potentially survive through multiple market cycles.
- Transparency & trust: Regulated under SEBI with required disclosures and risk communications.
Risks & Limitations
- Complex products: Best suited for informed investors, and not retail investors or beginners.
- Volatility: derivative exposure and niche strategies increase risk.
- Limited track record: As a new asset class, it is difficult to assess historical performance.
- Variable fees: Many may have performance-linked fees.
- Liquidity: Redemptions may be subject to notice periods or fixed maturity periods unlike mutual funds.
Final Thoughts
The future of the Indian asset management environment is SIFs, which offer superior strategies on a secure platform and fill the gap existing between mutual funds and PMS/AIFs. While they promise innovation and strategic diversification, investors should remain cautious due to complexity, cost, and limited track record. SIFs are not to be used instead of traditional holdings. Before investing in this new asset category, make sure to refer to the scheme-ISID of each scheme and consult a qualified financial advisor.
Written by Prajwal Hegde
