But what exactly is an SIF? And how does it differ from these more familiar instruments? Let’s decode it.
What is a Specialised Investment Fund (SIF)?
In March 2024, SEBI introduced the Specialised Investment Fund (SIF) framework to address a key gap in the market — between mass-market mutual funds and high-ticket investment options like PMS and AIFs. SIFs aim to offer:
- More flexible investment strategies,
- Enhanced regulatory oversight compared to AIFs,
- And bespoke investment opportunities, often with lower entry barriers than PMS.
Mutual Funds (MFs)
Mutual Funds are pooled investment vehicles regulated heavily by SEBI. They cater to retail investors and allow exposure to a broad set of asset classes such as equity, debt, and hybrid combinations.
Key traits of Mutual Funds:
- Low entry barriers (SIPs can start at ₹500)
- Highly liquid with daily NAVs and redemption flexibility
- Standardised investment strategy (equity, debt, hybrid)
- Ideal for passive investors seeking low-to-moderate risk
But their mass appeal also comes with limits — restricted customisation, fewer complex strategies, and a one-size-fits-most approach.
Portfolio Management Services (PMS)
PMS offerings are aimed at affluent investors looking for personalised strategies. They provide discretionary or advisory services for portfolios, usually managed by experienced fund managers.
Highlights:
- Minimum ticket size: Rs 50 lakh
- High degree of personalisation based on goals and risk appetite
- Actively managed and bespoke asset allocation
- Lower liquidity than mutual funds
- Higher costs (including management and performance fees)
Alternative Investment Funds (AIFs) – The High-Risk, High-Reward Engine
AIFs are pooled investments operating in less-regulated, non-traditional spaces. This includes private equity, hedge funds, structured debt, and real estate.
Key features:
- Minimum investment: Rs 1 crore
- Three categories: Category I (social impact, infra), Category II (private equity, debt), Category III (hedge funds)
- Less liquidity due to long lock-in periods
- Lower regulatory oversight
- Ideal for HNIs and institutional investors with higher risk tolerance
While they offer unparalleled exposure to niche assets, the complexity and high barriers make AIFs inaccessible for most retail investors.
Where do SIFs fit in?
SIFs aim to bridge the structured simplicity of mutual funds with the customisation of PMS and the sophistication of AIFs. They allow fund managers more flexibility in asset selection — including unlisted securities, real estate, and structured debt — while operating under a stricter regulatory framework than AIFs.
Structure and regulatory oversight
SIFs follow SEBI-mandated norms for transparency, liquidity, and diversification. Unlike AIFs — which are largely unregulated in how they allocate capital — SIFs must:
- Adhere to strict portfolio disclosures
- Offer SIP/SWP options
- Stick to a single strategy category (equity, debt, or hybrid) per fund
This ensures greater accountability and clarity for investors.
Furthermore, the minimum investment threshold for SIFs is ₹10 lakh, striking a middle ground between mutual funds and PMS/AIFs. This makes them suitable for experienced investors who may not yet qualify as HNIs.
Liquidity and tenure
Liquidity is one of the core differentiators.
- Mutual Funds: Daily NAVs, instant redemptions
- PMS: Periodic exits, subject to portfolio’s nature
- AIFs: Multi-year lock-ins; highly illiquid
- SIFs: Moderate liquidity — can be open-ended, closed-ended, or interval-based
Redemption periods for SIFs can extend up to 15 working days, allowing fund managers to manage liquidity prudently.
Investment flexibility and strategic depth
SIFs are allowed to operate only one strategy per fund — either:
- Equity-oriented
- Debt-oriented
- Hybrid
While this is limited compared to PMS or AIFs, it provides clarity and focus. This also prevents over-diversification within a single fund, which can dilute returns and increase risk unpredictability.
Conclusion
Specialised Investment Funds are a welcome innovation in India’s investment universe. They offer a tailored investment approach for affluent and informed investors who seek:
- More flexibility than mutual funds
- Lower entry barriers than PMS or AIFs
- And a regulated, strategy-driven structure that balances control and innovation
As Indian investors become more financially literate and seek nuanced products beyond vanilla funds, SIFs could become the new middle path, offering risk-calibrated sophistication for the next generation of wealth creators.
(The author Chakravarthy V. is Cofounder & Executive Director, Prime Wealth Finserv. Views are own)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
