SEBI Specialised Investment Funds (SIF) framework

SEBI Specialised Investment Funds (SIF) are a new category of investment vehicle introduced by SEBI circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/26 dated 7 March 2024, occupying a regulatory space between mutual funds (which are widely accessible, including to retail investors) and Alternative Investment Funds (AIFs), which are accessible only to sophisticated investors with a minimum commitment of ₹1 crore. SIFs are designed for “sophisticated” or “knowledgeable” investors with a minimum investment ticket of ₹10 lakh, enabling strategies that are not permissible under the standard SEBI (Mutual Funds) Regulations, 1996 investment restrictions. SIFs are offered by existing registered mutual fund AMCs under the same regulatory umbrella as mutual funds, without requiring a separate AIF registration. The framework is administered by the SEBI Investment Management Department.

Policy rationale

SEBI’s consultation paper preceding the SIF framework identified a gap in the Indian investment product landscape:

• Mutual funds (open to all, including retail investors): Constrained investment strategies, diversification requirements, conservative investment limits. No short-selling, no complex derivatives beyond hedging.
• AIFs: Flexible strategies but minimum ₹1 crore commitment and 24-month lock-up in most categories. Accessible to institutions and UHNIs only.

A mid-market segment of investors, High Net Worth Individuals (HNIs) with ₹10 lakh to ₹1 crore available for sophisticated strategies, had no suitable product. Offshore funds and portfolio management services (PMS, minimum ₹50 lakh) were the alternatives, but PMS is not collective (each investor has a separate portfolio) and lacks the pooling efficiency of a fund.

SIFs fill this gap by permitting complex strategies within the mutual fund’s regulatory infrastructure (daily NAV, custodian, auditor, trustee oversight) but with relaxed investment norms suited to sophisticated strategies.

Eligibility to launch SIFs

An AMC may launch SIF strategies if:

1. It is registered with SEBI as a mutual fund AMC under the 1996 Regulations.
2. It has a track record of at least three years of mutual fund operation.
3. Its net worth is at least ₹150 crore (consistent with the enhanced minimum net worth requirement for AMCs).
4. It has not been subject to any major regulatory enforcement action in the preceding five years.

New AMCs qualifying under the Mutual Fund Lite framework are not eligible to launch SIFs.

Minimum investment threshold

The minimum investment per investor per SIF strategy is ₹10 lakh (₹10,00,000). This applies to:

• Lump-sum subscriptions.
• SIP cumulative minimum (i.e., the first SIP instalment and the aggregate commitment must together be at least ₹10 lakh).

This threshold distinguishes SIFs from standard mutual funds (which can be subscribed with as little as ₹500 via SIP) and ensures the “sophisticated investor” gatekeeping.

Permitted investment strategies

SIFs are permitted to pursue strategies not available to standard mutual fund schemes, including:

• Long-short equity strategies: Taking short positions in equity or equity derivatives to the extent of 50% of the gross equity exposure.
• Inverse/derivative overlay strategies: Using exchange-traded or OTC derivatives for directional positions, not merely for hedging.
• Credit opportunities strategies: Investing in lower-rated (sub-investment grade) securities beyond the 35% limit applicable to standard credit risk funds.
• Infrastructure and real asset strategies: Direct real estate or infrastructure loans within enhanced concentration limits.
• Overseas allocation: Higher overseas investment limits within the SEBI/RBI aggregate cap (see SEBI MF overseas investment cap).
• REIT/InvIT exposure: Enhanced limits for REIT and InvIT exposure beyond the standard MF cap (see SEBI MF REIT/InvIT cap).

SEBI prescribes a menu of permitted SIF strategy types (called “investment approaches”) in the circular; each strategy type has defined norms. AMCs may not launch an arbitrary SIF strategy; it must fall within a recognised approach.

Structure

SIF strategies are structured as sub-accounts within the AMC’s mutual fund trust (similar to how mutual fund schemes are structured as separate portfolios within the trust). This means:

• The trustee company of the AMC also acts as trustee for SIF strategies.
• The custodian is the same as the AMC’s existing scheme custodian.
• SEBI SCORES grievance mechanism applies to SIF investors.
• Daily NAV computation and publication are mandatory (subject to the strategy type).

Key investor protections

Despite the “sophisticated” investor positioning:

• Daily NAV publication (or weekly, for illiquid strategy types).
• Audited accounts as part of the mutual fund’s annual audit.
• Trustee oversight.
• Exit window provisions for strategy termination or fundamental attribute changes.
• The riskometer framework applies (SIF strategies would typically carry “Very High” riskometer labels).

SIF versus AIF versus PMS

See also

• Mutual fund
• SEBI (Mutual Funds) Regulations, 1996
• SEBI Mutual Fund Lite framework
• SEBI Investment Management Department
• Riskometer framework (India)
• SEBI MF overseas investment cap
• SEBI MF REIT/InvIT cap
• Mutual fund industry in India
• Scheme Information Document

References

1. SEBI Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/26, 7 March 2024, Specialised Investment Funds (SIF).
2. SEBI Consultation Paper on SIF, November 2023.
3. SEBI (Mutual Funds) Regulations, 1996, as amended.
4. SEBI Master Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/137, 27 May 2024.