SIFs Explained: Bridging the Gap Between Mutual Funds and PMS

Thu, 15 May 2025

3 mins

Personal Finance

India's asset management landscape is evolving rapidly. Among the various investment vehicles, SEBI has issued guidelines for a new product i.e. Specialized Investment Funds (SIF) In this article, we delve into SIFs and how investors should look at this new product.

• What is Specialized Investment Funds (SIFs)?

  SIFs bring together the structure of Mutual Funds and Portfolio Management Services (PMS), offering investors a powerful blend of both. With the flexibility to adapt to your financial goals and the sophistication of expert-driven strategies, SIFs are designed to take your investing experience to the next level.

• What is the minimum investment amount for SIFs?

  For investors considering SIFs, the minimum investment amount is a factor to assess. As opposed to the products like PMS, SIFs offer entry point at just Rs 10 lakhs. This new product development is a strategic move to attract a broader range of investors, allowing them to harness the potential of SIFs.

• Where do SIFs invest? How does SIF work?

  The investors money is invested by AMC in either of the asset classes debt, equity, real estate investment trusts (REITs) or derivatives like futures and options (F&O). Thus SIF can have a flexible strategy.
  
  What’s more, fund managers can short-sell up to 25% of the portfolio’s net value using derivatives. This means they can aim to generate returns not just when markets rise, but also when certain stocks are expected to fall.

• Who should invest in SIF?

  An investor who wants a more advanced option than Mutual fund and has a minimum corpus of 10 lakh rupees can consider investing in SIFs. The SIFs as a new product offering is exciting from investors viewpoint, who otherwise are unable to participate in similar products due to high entry barriers.
  
  They present a more focused investment strategy and the flexibility that the mass affluent and HNI segments in India find appealing. With a better alignment to specific investment outcomes, SIFs enable investors to target growth, income, or preservation of capital in line with their market expectations.

• What are the fees and expenses for SIFs?

  Since SIFs will follow a mutual fund structure, their fee structure will operate within the framework defined for mutual funds. The fees and expenses for the investment strategies under SIF will be per Regulation 52 of the mutual fund regulations.

• Are SIFs SEBI regulated?

  The Securities and Exchange Board of India (SEBI) has issued the guidelines for SIFs. With regulatory frameworks aimed at ensuring investor protection while encouraging financial innovation, SEBI provides a robust foundation for the growth of these funds.
  
  To know more about guidelines laid by SEBI you may check their website https://www.sebi.gov.in/legal/circulars/feb-2025/regulatory-framework-for-specialized-investment-funds-sif-_92299.html

• Who offers SIF in India?

  In India, Specialized Investment Funds (SIFs) are offered by SEBI-registered Asset Management Companies (AMCs). SEBI introduced the SIF framework to give investors a new option - one that fills the gap between mutual funds and portfolio management services, combining the strengths of both.

• Difference between Specialized Investment Funds (SIF) and Mutual funds (MF)

  While Mutual funds and SIFs has multiple differences, key differences include:
  
  1. Minimum Investment:
  The minimum investment required for SIF is Rs 10 lakhs however you can start investing in mutual funds for as low as Rs 500
  
  2. Higher Allocation Limits:
  SIFs allow fund managers to invest up to 15% in a single security—more than the 10% cap set for mutual funds. Fixed-income strategies within SIFs also enjoy added flexibility, giving managers more room to manoeuvre.
  
  3. Greater Exposure to REITs and InvITs:
  SIFs can invest up to 20% in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), which is twice the limit permitted in mutual funds. This opens the door to more diversified and yield-focused opportunities.
  
  4. Flexibility and customization: SIFs offers investors option to choose investment vehicles unlike mutual funds, where strategy is decided and frozen by the fund manager.

• Benefits of investing in SIFs

  1. Diversification – SIFs helps diversify your portfolio due to exposure to more complex investment options like PMS and AIFs.
  
  2. Potential for adequate returns – Due to customization SIFs has a potential for adequate returns

• To bring it to a close

  Investors looking beyond the traditional investment avenues but having restricted access due to minimum investment threshold requirements in certain products like PMS, AIF can look at SIFs as a product. As these funds carve out their place, they offer investors a vehicle for financial growth, with the backing of a vigilant regulatory body in SEBI. For those looking to upgrade their investment experience, SIFs represent a blend of innovation, diversification, and specialization.
  
  Investments in Specialized Investment Fund involves relatively higher risk including potential loss of capital, liquidity risk and market volatility. Please read all investment strategy related documents carefully before making the investment decision.