What are Specialised Investment Funds (SIFs)? How is it different from traditional Mutual Funds?

Specialised Investment Funds (SIFs) may sound similar to the Systematic Investment Plans (SIPs) we commonly use in Mutual Funds, but despite the similar-sounding name, they are quite different. You can think of SIFs as a “cousin” to Mutual Funds — one that adopts a much more flexible approach to investing compared to its more traditional counterpart.

Unlike Mutual Funds, which typically follow a long-only investment strategy, SIFs aim to benefit not only from rising markets but also develop strategies to generate returns during flat or sideways markets. The Securities and Exchange Board of India (SEBI) has approved seven distinct strategies under three broad categories:

1.Equity Strategies

2.Debt Strategies

3.Hybrid Strategies

Under these categories, SIFs are allowed to take up to 25% exposure in derivatives, aiming to adopt a moderately riskier approach in order to potentially outperform traditional mutual funds.

Who Should Invest?

The minimum investment required for SIFs is ₹10 lakh. However, it’s important not to look at this figure in isolation. As Radhika Gupta of Edelweiss rightly pointed out in an interview, individuals considering this product should ideally have a minimum net worth of ₹50 lakh to ₹1 crore. SIFs should be viewed as a portfolio diversification tool rather than a primary investment avenue. In this sense, they appear to be designed for investors whose net worth is below the threshold of Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs), which may not necessarily be the case.

Another reason for the higher entry barrier is to ensure that only investors with sufficient risk appetite and a basic understanding of market dynamics, especially the Futures and Options (FnO) segment, participate. These products come with complexities and risks that may not be suitable for all investors.

SIFs are a relatively new product category, introduced to allow professional fund managers to systematically manage investments across all three market cycles—bullish, neutral, and bearish, using strategies like long-short positions and hedging, with the aim of enhancing overall returns.

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Disclaimer: The views expressed in this article are intended for educational purposes only and should not be considered as buy/sell recommendations. Investing in stocks involves financial risk. Please consult a qualified financial advisor before making any investment decisions.