Specialised Investment Funds (SIFs) are rapidly emerging as a new and sophisticated investment option in India’s equity markets. Positioned as a bridge between traditional mutual funds and Portfolio Management Services (PMS), SIFs are attracting growing interest, especially from High Net-Worth Individuals (HNIs). While these funds offer innovative strategies and the potential to earn returns in both rising and falling markets, experts caution that investors must clearly understand the high-risk nature involved before committing capital.
Introduced under a regulatory framework by the Securities and Exchange Board of India (SEBI), SIFs became operational from April 2025. They are designed for investors who are willing to take calculated risks and seek advanced market strategies beyond conventional mutual funds.
A Specialised Investment Fund (SIF) is a smart, strategy-driven investment vehicle that allows fund managers greater flexibility compared to mutual funds, while still maintaining higher transparency than PMS products. SEBI has intentionally positioned SIFs between mutual funds and PMS to offer investors the best of both worlds.
SIFs are primarily aimed at HNIs, with a minimum investment requirement of ₹10 lakh per PAN. These funds often deploy long-short strategies, which means they can take long (buy) positions in strong companies and short (sell) positions in weaker stocks or sectors. This structure enables SIFs to potentially generate returns regardless of whether the market is rising or falling.
The growing interest in SIFs reflects a shift among sophisticated investors toward more flexible and dynamic investment approaches, especially in volatile market conditions.
SIF fund managers actively manage portfolios using a combination of strategies such as equity long-short, debt long-short, hybrid models, sector rotation, and dynamic asset allocation. Unlike traditional funds that rely heavily on market direction, SIFs aim to extract value from relative performance between stocks or sectors.
One of the key advantages of SIFs is their ability to profit even during market downturns, provided the short positions perform better than the long positions. However, this also increases complexity and risk.
SEBI has introduced strict regulatory guidelines to manage risk:
Total exposure can go up to 100% of Assets Under Management (AUM)
Unhedged short exposure is capped at 25%
Mandatory disclosures and reporting norms apply
Minimum investment remains ₹10 lakh per investor at the PAN level
These safeguards aim to balance innovation with investor protection.
1. Market-Neutral Return Potential
SIFs are structured to aim for stable returns in both bull and bear markets by balancing long and short positions.
2. Flexible Portfolio Structure
They offer flexibility similar to PMS products, while maintaining the transparency standards typically associated with mutual funds.
3. Professional Risk Management
Experienced fund managers actively monitor and control risk using advanced strategies, derivatives, and market insights.
4. Portfolio Diversification Tool
For HNIs and institutional investors, SIFs can act as a strategic tool to balance overall portfolio risk and returns.
Additionally, certain interval-based strategies within SIFs may receive exemptions from traditional maturity-related restrictions, offering further flexibility.
Despite their advantages, SIFs are not suitable for everyone. Investors must be fully aware of the risks involved:
High Risk Exposure
If long positions decline while short positions rise, investors may face losses on both sides simultaneously.
Limited Liquidity
SIFs do not usually offer daily redemption options. Many operate on an interval-based structure, increasing liquidity risk.
Complex Strategies
The use of derivatives, options trading, and advanced strategies adds layers of complexity and amplifies potential losses if markets move unexpectedly.
Because of these factors, SIFs require a higher level of market understanding and risk tolerance.
SIFs are best suited for HNIs who can invest between ₹10 lakh and ₹50 lakh and are looking for strategic, market-linked returns. Compared to mutual funds, SIFs carry higher risk, but they are more accessible than PMS products, which typically require a minimum investment of ₹50 lakh.
Before investing, experts strongly advise:
Carefully reading all fund-related documents
Understanding the strategy and risk profile
Consulting a qualified financial advisor
SIFs represent a new generation of investment products designed for sophisticated investors seeking flexibility, diversification, and advanced strategies. While the growing interest highlights their potential, the high-risk nature of these funds cannot be ignored.
For investors with adequate risk appetite, financial knowledge, and long-term perspective, SIFs can be a valuable addition to a diversified portfolio. However, informed decision-making and professional guidance remain essential to navigating this evolving investment landscape successfully.
