Specialized Investment Fund

What is a Specialised Investment Fund(SIF)?

Specialised Investment Fund (SIF) is a newly introduced asset class aimed at investors seeking advanced investment strategies. It is designed as a higher-ticket investment product to cater to the growing segment of sophisticated investors.

Over the years, India’s investment management landscape has evolved significantly. SEBI has adopted a segmented, risk-based regulatory approach for different investment products, taking into account factors such as complexity, target investor profile, and minimum investment thresholds.

Today, a wide range of investment options with distinct risk-return profiles exist to serve retail, high-net-worth, and institutional investors. The regulatory and prudential norms governing these products are progressively more flexible as we move from Mutual Funds (MFs) to Portfolio Management Services (PMS) and then to Alternative Investment Funds (AIFs) — aligning with the sophistication and scale of their target investors.

However, there remains a gap between MFs and PMS in terms of portfolio flexibility. To address this, SEBI has amended the Mutual Funds Regulations, 1996, creating a broad regulatory framework for a new product category — the Specialized Investment Fund (SIF) — that bridges this gap.

Eligibility Criteria for Specialized Investment Fund (SIF):

A registered mutual fund may establish SIF, provided they meet the eligibility criteria under one of the following routes:

1. Route 1 - Sound Track Record:
2. 1. Mutual Fund has been in operation for a minimum period of 3 years 
   2. Has an average asset under management (AUM) greater than Rs. 10,000 crores, in immediately preceding 3 years.
   3. No action has been initiated or taken against the Sponsor or Asset Management Company (AMC) under section 11, 11B, and/or Section 24 of the SEBI Act, 1992 during the last 3 years
3. Route 2 - Alternate Route:
4. 1. The AMC has appointed a Chief Investment Officer (‘CIO’) for the SIF with an experience of fund management of at least 10 years and has managed an average AUM of not less than INR 5,000 crores b. An additional Fund Manager for the SIF with experience of fund management of at least 3 years and has managed an average AUM of not less than INR 500 crores.
   2. No action has been initiated or taken against the Sponsor/AMC under section 11, 11B, and/or Section 24 of the SEBI Act, 1992 during the last 3 years.

The AMC may share resources for operations across mutual funds and SIF. A registered Mutual Fund shall file an application for prior approval with SEBI for establishment of an SIF, in the manner as may be specified by SEBI.

Minimum Investment for Specialised Investment Fund:

The SIF will only accept investments of at least Rs.10 lakh from each investor, summed across all its investment strategies, except in the case of an accredited investor.

1. The AMC must verify that each investor’s total investment across every SIF strategy, at the PAN level, meets or exceeds Rs. 10 lakh (the “Minimum Investment Threshold”).
2. This Rs. 10 lakh requirement applies solely to investments under the SIF and does not count any amounts the investor has placed in the AMC’s regular mutual fund schemes.
3. The AMC may provide systematic options—such as SIP, SWP and STP—for its SIF strategies, provided each investor’s total SIF investment always remains at or above the Rs. 10 lakh threshold.

Investment Strategy:

An investment strategy under the SIF shall be launched as an open-ended or close-ended or interval investment strategy with subscription and redemption frequency appropriately disclosed in the offer document. 

The following Investment Strategies are permitted to be launched under SIF:

1) Equity Oriented Investment Strategies:

2) Debt Oriented Investment Strategies:

3) Hybrid Investment Strategies:

Please check the SEBI circular for more information on the above strategies or Contact Us

To avoid proliferation of investment strategies and in line with the approach followed for categorisation of MF schemes, only one investment strategy shall be permitted to be launched under each of the aforementioned categories.

Benchmarking of Investment Strategies:

1. The investment strategies of SIF shall follow a single-tier benchmark structure. Provided that, AMC at its discretion may also provide a second tier benchmark for investment strategies as applicable for schemes of Mutual Funds under para 1.9 of the Master Circular
2. The AMC shall appropriately select any of broad market indices available, as a benchmark index depending on the investment objective and portfolio of the investment strategy.
3. The guiding principles for selection of benchmarks are as follows:
4. 1. Equity oriented investment strategies shall be compared against a suitable broad market index such as BSE Sensex or NSE Nifty or BSE 100 or CIRISL 500 etc.
   2. Debt oriented investment strategies shall be compared with a suitable broad market index that is a representative of the fund’s portfolio.
   3. Hybrid investment strategies shall be compared with suitable broad market benchmarks wherever available.

Risk Band:

Similar to Mutual Fund schemes, the potential risk associated with the investment strategies of the SIF shall be depicted through a pictorial risk meter, termed as “Risk-band”. The Risk-band shall have the following five levels of risks for investment strategies of SIF:

• Risk band level 1 (Lowest risk)
• Risk band level 2
• Risk band level 3
• Risk band level 4
• Risk band level 5 (Highest Risk)

Based on the scheme characteristics, SIF shall assign risk level for schemes at the time of launch of New Fund Offer of the investment strategy. 

Any change in risk band shall be communicated by way of Notice cum Addendum and by way of an e-mail or SMS to unitholders of that particular investment strategy. 

Risk-band shall be evaluated on a monthly basis and SIF/AMCs shall disclose the risk-band for all their investment strategies on their respective websites and on the website of AMFI within 10 days from the close of each month. 

SIFs shall disclose the risk level of investment strategies as on March 31st of every year, along with the number of times the risk level has changed over the year, on their websites and AMFI website.

Specialised Investment Fund Vs Mutual Fund:

Feature	Mutual Funds (MFs)	Specialized Investment Funds (SIFs)
Minimum Investment	As low as ₹500	₹10 lakh (high-ticket investment)
Target Investors	Retail investors	Sophisticated investors and high-net-worth individuals
Regulatory Framework	SEBI (Mutual Fund) Regulations, highly rigid	SEBI (Mutual Fund) Regulations, but with greater flexibility
Investment Strategy Flexibility	Limited to standard categories (equity, debt, hybrid) with restrictions on asset allocation	High flexibility: can pursue thematic, sectoral, long-short equity, debt, hybrid strategies; can take short positions up to 25% of NAV
Portfolio Concentration	Diversified portfolios with caps on single security exposure (typically 10%)	Can have higher concentration (up to 15% per security)
Investment Universe	Mostly listed securities, limited exposure to alternatives	Can invest in listed, unlisted securities, private equity, REITs, InvITs with higher limits
Liquidity	Generally high (daily NAV, instant redemption)	Moderate liquidity: can be open-ended, close-ended or interval funds with varied redemption windows
Transparency	Daily NAV, regular disclosures	Regulated disclosures but operationally more flexible
Fund Structure	Units owned by investors	Pooled fund structure managed by AMC, more flexible
Risk Profile	Generally moderate to low risk (depending on scheme)	Higher risk due to focused and flexible strategies

Source: SEBI Circular

Regards,

Honvest Team.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

This document is based on our internal data, publicly available information, and other sources we believe to be reliable. It is intended for general informational purposes only and does not cover every material fact. It should not be considered investment advice. We make no guarantees about the accuracy or completeness of its contents and disclaim any liability for losses or damages resulting from its use. Any decisions you make based on this document are your sole responsibility.