The rise of SIFs: A new frontier for Indian investors

In 2025, SEBI introduced a new category of products for Indian investors. Through the Specialised Investment Funds (SIFs) mechanism, investors may access a broader range of investment strategies and other specified strategies within a regulated mutual fund structure that carries defined risk controls, disclosure formats and operational safeguards.

This category is distinct from regular mutual fund schemes such as large cap or flexi cap funds. It is positioned for experienced investors with a relatively high investment capacity who require a structure with more strategic flexibility than traditional mutual funds, without moving into the Portfolio Management Services (PMS) or Alternative Investment Funds (AIF) framework.

Table of contents

• Introduction to SIFs
• Key features of SIFs
• Advantages of SIFs
• Risks associated with SIFs

Introduction to SIFs

A Specialised Investment Fund is a category introduced under the SEBI mutual fund regulations to run specified long–short strategies across equity, debt and hybrid segments. SEBI’s circular dated February 27, 2025, outlines the core features of this framework, and subsequent clarifications issued in April 2025, including the ISID format, define how each scheme must disclose its strategy, risks, and operational aspects.

SIFs are not intended for mass-retail participation. They are structured for investors who meet the minimum investment requirement of ₹10 lakh at the PAN level across all SIF strategies of a particular AMC.

Only AMCs and investment teams meeting specific experience and AUM eligibility criteria are permitted to launch SIFs.

Key features of SIFs

• Eligibility criteria for the AMC: It has operated for at least three years with an average AUM of not less than ₹10,000 crore over the preceding three years, or it has a chief investment officer with at least ten years of fund-management experience handling ₹5,000 crore or more, along with an additional fund manager who has at least three years of experience managing ₹500 crore or more. These conditions are intended to ensure that SIFs are managed by investment teams with relevant experience.
• High minimum investment and investor profile: The framework specifies a minimum investment of ₹10 lakh per investor at the PAN level across all SIF strategies of an AMC. This minimum is applicable only to SIF investments and not to other mutual fund schemes. Accredited investors may invest below this threshold if the specific scheme’s ISID allows it.
• Permitted strategies and use of derivatives: SEBI has defined a prescribed list of strategies permitted under SIFs, including three equity long–short categories, two debt long–short categories and hybrid long–short or active asset allocation styles. These strategies may take short positions through derivatives within regulatory limits, generally up to 25% of net assets, subject to category-specific rules.
• Asset universe and concentration limits: Depending on the strategy category, SIFs may allocate to equity, debt, derivatives on equity and debt, REITs, InvITs and commodity derivatives. To manage concentration risk within debt portfolios, SEBI caps exposure per issuer at 20% of net assets for AAA-rated instruments, 16% for AA-rated instruments and 12% for A-rated and below, with an additional 5% allowed subject to trustee and AMC board approval. Sector exposure in debt and money-market instruments is generally capped at 25% of net assets.

Advantages of SIFs

Investors familiar with market cycles may view SIFs as a category that allows access to strategies that differ from traditional long-only mutual funds. These structures permit the use of long–short approaches, tactical allocation and derivatives exposure within a regulated mutual fund environment.

SIFs may also provide access to a broader investment universe that includes instruments such as REITs, InvITs and commodity derivatives, depending on the strategy category. This may provide diversification benefits within a single scheme structure.

The framework includes detailed operational safeguards such as issuer caps, sector limits, listing requirements for interval and close-ended structures, risk-band disclosures, and comprehensive documentation, which help define how these strategies are implemented.

Also Read: FMCG Mutual Funds: Meaning and Key Consideration

Risks associated with SIFs

SIFs also carry risks that investors should evaluate carefully:

• Long–short strategies involve complexity, and outcomes may vary based on market conditions and the effectiveness of relative-value decisions.
• Liquidity may be limited in interval or listed structures, since redemptions are available only during specified windows or through exchange transactions, where trading volumes may be limited.
• Debt-oriented strategies may face credit and concentration risks if exposures tilt towards lower-rated issuers or particular sectors within the permitted limits.
• There is also reliance on the investment team’s approach, since strategy design and execution are central to long–short portfolios.

Frequently Asked Questions

What are Specialised Investment Funds (SIFs)?

SIFs are SEBI-regulated schemes under the mutual fund regulations designed to run specified long–short and related strategies across equity, debt and hybrid categories for experienced investors. They follow the mutual fund structure in areas such as trusteeship, disclosures and operational oversight but pursue strategies permitted under a distinct long–short framework.

How do SIFs differ from traditional mutual funds?

Traditional mutual funds primarily run long-only portfolios, have relatively low minimum investment amounts and offer daily liquidity in open-ended schemes. SIFs operate with a higher minimum investment threshold, usually ₹10 lakh at the PAN level per AMC, and follow long–short or multi-asset quantitative frameworks with different liquidity arrangements and risk characteristics.

What are the advantages of investing in SIFs?

SIFs may offer access to permitted long–short strategies, broader asset classes and structured risk controls within a regulated mutual fund environment. These features may appeal to investors who have experience with market cycles and are seeking exposure to strategies that differ from conventional long-only mutual fund categories.

What risks are associated with SIFs?

SIFs may involve strategy risk, derivatives-related risk, potential drawdowns, relatively higher volatility, credit and concentration risk in debt exposures and liquidity constraints due to interval or listed formats. Investors also rely on the investment team’s expertise, and the higher minimum investment amount means the approach differs from staggered investment methods used in traditional mutual fund investing.