Indian investors now have access to Specialised Investment Funds (SIFs) — a new investment avenue designed for more affluent investors seeking strategies beyond traditional equity and debt. SEBI allows mutual fund houses to launch SIFs under separate branding across equity, debt, and hybrid categories. The first fund was launched by Quant Mutual Fund in September 2025, followed by Edelweiss and SBI Mutual Fund introducing hybrid long-short SIFs on October 1, 2025. More fund houses are expected to follow soon.
What makes them different
SIFs sit midway between mutual funds and Portfolio Management Services (PMS). Mutual funds allow entry with as little as ₹100, while PMS and AIFs require ₹50 lakh to ₹1 crore. SIFs, meanwhile, have a minimum investment of ₹10 lakh (₹1 lakh for accredited investors).
Like mutual funds and PMS, SIFs invest across equity and debt. Their unique feature is the ability to take naked short positions of up to 25 per cent of assets — something mutual funds and PMS cannot do except for hedging. Naked shorting involves selling securities without actually owning them.
Edelweiss Altiva Hybrid Long-Short Fund
Edelweiss Mutual Fund has launched the Altiva Hybrid Long-Short Fund (AHLSF) as one of the first SIFs, blending equity, debt, arbitrage, and derivative strategies. Subscriptions are open daily, while redemptions are allowed twice a week — on Mondays and Wednesdays. Investors can choose between regular and direct plans, in both growth and IDCW options. The NFO will be open for subscription from October 1 to October 15, 2025.
The expense ratios are comparable to those of mutual funds, with the maximum allowable expense ratio is capped at 2.35 per cent under regular plan as stated in the scheme information document.
Portfolio allocation
SEBI rules require hybrid long-short SIFs to hold at least 25 per cent each in equity and debt. AHLSF leans more towards debt, with about 50 per cent of assets allocated there. The remainder is spread across arbitrage (20–40 per cent), unhedged equity (up to 10 per cent), and derivative strategies (10–15 per cent).
The unhedged equity portion will take concentrated positions in special opportunities such as IPOs, buybacks, mergers, or demergers. If such events are limited, the fund increases its debt allocation. On the debt side, AHLSF invests in AAA sovereigns and AA-rated corporate bonds, approximately 20–30 per cent each, balancing duration and yield.
Role of derivatives
About 10–15 per cent of the portfolio will be allocated to long-short positions, serving both as risk management and a way to enhance returns. The fund has access to the entire F&O universe and will primarily use three long-short strategies, with covered calls as the main focus.
Covered calls involve holding equities while selling call options to earn premiums. Covered calls help holders of stocks gain additional premium income from selling call options in it. If the stock rises beyond the strike price, the gains get capped, but the premium to an extent will make up for losses.
Covered calls tend to perform best in stable or moderately rising markets but may underperform in strong bullish phases. It is worth noting that mutual fund categories such as balanced advantage funds and equity savings funds are also permitted to use covered calls, albeit with limited exposure
In volatile, directionless markets, the fund may use straddle and strangle strategies — buying calls and puts in the same stock to capitalise on large price swings. Straddles use the same strike price, while strangles use different strikes. These strategies can boost returns in volatile conditions but carry higher risks if the stock remains stable.
The fund may also implement protective puts, buying puts on held equities to guard against downside. This limits losses during declines while still allowing participation in upward movements. However, premiums reduce overall returns, and the strategy may underperform in a rising or sideways markets.
Higher debt and arbitrage allocations (70–90 per cent of assets) make AHLSF relatively conservative within the hybrid category, aiming to deliver 1–2 per cent higher returns than traditional arbitrage funds. In comparison, the peer fund, SBI Magna SIF Hybrid Long-Short targets gross equity exposure of 65–75 per cent, with debt at 25–35 per cent.
Almost 50 per cent of AHLSF’s portfolio is in equities, arbitrage, and derivatives, classifying it as a “non-equity, non-debt” fund for taxation purposes. Long-term gains are taxed at just 12.5 per cent after two years, providing a tax advantage over debt and conservative hybrid funds.
What should investors do?
SIFs introduce strategies previously unavailable in mutual funds, allowing investors to benefit in both rising and falling markets.
However, Indian AMCs are yet to demonstrate any track record in long-short strategies. The Altiva SIF Hybrid Long-Short structure requires the fund to get multiple calls right on market direction, allocation and the correct derivative strategies suited to future market direction. Even a small allocation to long-short positions increases risk and could backfire if market calls go wrong.
Investors should consider SIFs only after funds establish credibility and demonstrate consistent outcomes. Smaller investors are better served by traditional mutual funds for steady wealth creation and simpler portfolio management.
Published on September 27, 2025