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Tata Capital > Blog > Wealth Services > Specialised Investment Funds (SIFs) – All You Need to Know About

Wealth Services

Specialised Investment Funds (SIFs) – All You Need to Know About

Specialised Investment Funds (SIFs) – All You Need to Know About

Are you thinking beyond the traditional options of mutual funds but are not ready for the high entry barrier of portfolio management services (PMS)? The Securities and Exchange Board of India (SEBI) has introduced an innovative solution: Specialized Investment Funds (SIFs). Designed for investors who want more control but also access to greater flexibility, SIFs are the perfect middle ground.

What are Specialized Investment Funds?

Specialized Investment Funds (SIFs) are a newly introduced category designed for investors who want access to advanced investment strategies without the significant financial commitment of PMS. SIFs are positioned between traditional mutual funds and PMS, offering a higher risk-reward than mutual funds while remaining more accessible than PMS. They allow for access to a wide range of asset classes which includes new Alternates such as infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) and derivatives among others.

Key Features of Specialized Investment Funds

1. Minimum investment threshold – For SIF investment, investors must commit a minimum of Rs. 10 lakh that invested in one Investment strategy. However, this requirement is waived for accredited investors.

2. Wide range of investment strategies – A SIF fund can employ equity, debt, hybrid investment strategies and also includes derivatives and sectoral investment strategies. Such strategies provide diversification and flexibility, making specialized investment funds (SIF) ideal for investors seeking more control.

3. Exposure to derivatives – SIF can allocate up to 25% of their net investments to investments like futures and options, allowing for tactical asset allocation, leverage, and hedging i.e. maximum short exposure through unhedged derivative positions in an investment strategy should be 25% This makes SIF investment a robust tool for risk management.

4. SEBI-mandated risk categorization – SEBI has introduced a five-tier risk scale for SIF funds to ensure transparency and help investors assess risks. This empowers investors to align their SIF investment choices with their risk profile.

Eligibility Criteria of Specialized Investment Funds

To manage specialized investment funds (SIFs), asset management companies (AMC) must meet the following criteria:

1. Asset Under Management (AUM) – The AMC is required to maintain an average AUM of at least Rs. 10,000 crores over the past three years. Otherwise, the AMC’s Chief Investment Officer (CIO) must have over 10 years of experience managing AUMs of Rs. 5,000 crores or more.

2. Operational history – The AMC must have a minimum operational track record of three years.

Regulatory Framework and Implementation

SEBI has amended the SEBI (Mutual Funds) Regulations Act, 1996, to introduce a holistic regulatory framework, especially for specialized investment funds (SIFs). This amendment underscores an important shift in the investment ecosystem, offering an official structure for the management of SIF funds.

Conclusion

Want to diversify your investment portfolio? Specialized Investment Funds (SIFs) are your answer. They are a next-gen investment vehicle, bridging the gap between mutual funds and PMS. SIFs are an innovative diversification tool for savvy investors ready to go beyond the basic investment.

For further guidance before making an investment decision, connect with Tata Capital Wealth—a trusted name in India’s wealth management space. Our experienced advisors provide personalized financial planning and SIF services tailored to help you achieve your long-term financial goals. Visit our website to learn more.

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FAQs

What is the difference between SIF and AIF?

Specialized Investment Funds (SIFs) are a subcategory of mutual funds regulated under SEBI Mutual Funds Regulations. They offer advanced strategies and lower entry barriers than Alternative Investment Funds (AIFs). AIFs are privately pooled investment vehicles regulated separately under SEBI AIF Regulations.

What is the minimum investment in SIF?

The minimum investment in a SIF fund is Rs. 10 lakh, except for accredited investors, who are exempt from this requirement.

How is SIF taxed?

SIFs are taxed like debt mutual funds—gains are added to the investor's income and taxed as per their applicable income tax slab.

Who can sell SIF?

Only SEBI-registered mutual fund distributors and intermediaries are authorized to sell and distribute SIFs.

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