Specialised Investment Funds (SIFs) have been around for roughly a year since SEBI’s framework came into effect on April 1, 2025, though India’s first SIF launch happened only in August 2025. Despite being a relatively new category, SIFs have already gathered meaningful traction. According to SIF360, the total assets under management (AUM) of SIFs in India have reached Rs 12,255 crore.
Positioned between traditional mutual funds and high-ticket Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs), SIFs are increasingly emerging as a distinct investment category for sophisticated investors seeking greater flexibility.
Several asset management companies have already rolled out strategies under the SIF framework, with Hybrid Long-Short Funds among the more active categories, according to SIF360. The pipeline is still expanding. Under its Prism SIF platform, JioBlackRock Mutual Fund has also filed draft documents with SEBI for a hybrid long-short strategy, as reported by INDmoney.
That brings us to the key question the market has been asking since the framework was unveiled: do SIFs genuinely bridge the gap between mutual funds and PMS, or are they evolving into an entirely separate category with their own limitations and potential?
Where do mutual funds stop?
Conventional mutual funds operate under SEBI’s Mutual Fund Regulations 1996. The constraints are structural, not incidental. They are long-only, traditional mutual funds that operate under tighter derivative-use constraints than SIFs. Diversification norms limit concentration. Every restriction exists for good reason: the median mutual fund investor needs capital preservation and market participation, not alpha generation across cycles.
These constraints work well for what mutual funds are designed to do. For an investor who wants to profit from a falling stock, rotate tactically on a macro thesis, or run a market-neutral book, mutual funds are not a conservative choice. They are the wrong instrument entirely.
That is the gap. It is not about ticket size. It is about what the regulatory framework permits a manager to do with your money.
What SIFs actually unlock?
Under SEBI’s amended Mutual Fund Regulations, effective April 1, 2025, SIF managers can hold simultaneous long and short equity positions, deploy derivatives directionally subject to an approximately 25% cap on unhedged positions, and allocate across equities, debt, REITs, and InvITs within a single mandate, as per the National Institute of Securities Markets (NISM). From 2026, SEBI reclassified REIT exposures within SIFs as equity, expanding portfolio construction further, as per the circular dated Nov 28, 2025.
The tax structure adds to the case. The exact tax rate you pay on your gains will vary widely depending on the mix of underlying assets in the fund and how long you hold the fund. For the equity-oriented SIFs having equity exposure of not less than 65%, the gains are long-term if they are held for more than 12 months and are taxed at 12.5% and short-term gains are taxed at 20%. Tax treatment depends on whether the SIF qualifies as equity-oriented or non-equity under prevailing tax rules.
These rates apply when you redeem units – not when the manager trades internally. A SIF manager repositioning the portfolio aggressively does not trigger a tax event for unit holders. The 12-month clock runs from your entry date, not the manager’s transaction date.
The Rs 10 lakh entry point – against Rs 50 lakh for PMS and Rs 1 crore for AIF Category III — reflects SEBI’s deliberate intent to widen access. Strategies that previously required Rs 50 lakh are now available at a fifth of that, inside a regulated, disclosed, trustee-governed structure.
On the mutual fund side of the gap, the bridge is real.
Where PMS takes over
The gap SIFs do not close is equally specific – and worth being honest about.
At Rs 10 lakh, you buy units in a pooled scheme. Every investor holds identical exposure, governed by a fixed Investment Strategy Information Document filed with SEBI before launch. There is no mechanism for individual deviation, regardless of how much you invest or how long you have been a client.
At Rs 50 lakh in PMS, you own the underlying securities directly in a segregated demat account. The mandate is built around you specifically. If you already carry heavy banking exposure through RSUs or a family business, your PMS manager can structurally underweight financials in your portfolio. A SIF manager cannot make that call for you – the ISID mandates one strategy applied uniformly to everyone in the scheme.
The tax picture also reverses. In PMS, you own securities directly, so every transaction the manager executes is a taxable event in your hands in that financial year – regardless of whether you have redeemed. A PMS manager running an active mandate can generate predominantly short-term gains in your hands even after years of holding the account. This is not a risk buried in fine print. It is how direct securities ownership works under Indian tax law, and it is the structural cost of the personalisation PMS provides.
SIFs cannot replicate individual mandate customisation. No regulatory amendment changes that – it is intrinsic to any pooled fund structure.
SIF strategies gain traction; Hybrid long-short funds lead investor preference
Over the past year, more than a dozen investment strategies have been launched, collectively garnering nearly Rs 12,000 crore in AUM as of April 2026. What stands out is that a significant share of these inflows has been directed towards the Hybrid Long-Short Fund category, reflecting a clear investor preference for solutions that aim to provide stronger downside protection while still participating meaningfully in rising markets.
Unlike traditional hybrid funds, where the net equity exposure often carries directional market risk and tends to move broadly in line with equity indices, Hybrid Long-Short strategies can be structured to deliver more non-linear outcomes. In other words, they seek to limit downside participation during market corrections while retaining a reasonable portion of upside participation during favourable market phases, albeit with relatively capped return potential on both sides.
“We have seen some of the existing SIF Strategies been able to protect downside returns in the past few months since their launch, which again emphasises the importance of hedging and derivative (shorting), which are 2 key features which SIFs have in their armour compared to plain vanilla MF schemes,” commented Vaibhav Shah, Head – Products, Business Strategy & International Business, Mirae Asset Mutual Fund.
An important aspect for investors and distributors to recognise is that investment strategies within the same SIF category can exhibit materially different risk-return characteristics depending on portfolio construction and derivative usage; hence, they should do their homework to understand the fund strategy and positioning rather than just simply compare returns, Vaibhav Shah added.
The direct answer
SIFs bridge the gap between mutual funds and PMS – but only halfway.
On the mutual fund side, the bridge holds. Strategy depth that was unavailable below Rs 50 lakh is now accessible at Rs 10 lakh, within a transparent framework, with tax treatment that does not penalise active internal management. For an investor whose frustration was always with long-only constraints rather than ticket size, SIFs are a genuine answer.
On the PMS side, the bridge does not reach. Individual mandate customisation, direct securities ownership, and uncapped derivative latitude are not features any pooled fund can offer. The investor with concentrated existing positions, embedded tax complexity, or a portfolio that genuinely needs to be built around their specific situation still needs PMS – at the price PMS requires.
What remains genuinely unknown is how SIF strategies perform through a full market cycle. The product has not been tested through a sustained equity drawdown. Short-side execution quality – the defining test of any genuine long-short strategy – remains unobserved under real stress. One year of inflow data confirms appetite. It confirms nothing about durability.
So, the gap is half-bridged. For many investors, that is exactly enough. For others, it falls precisely short.
Disclaimer:
This article is for informational purposes only and should not be considered investment advice. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Investors are advised to consult a financial advisor before making investment decisions.