Specialised Investment Funds (SIFs) have recently become the talk of the town among India’s investor community. Introduced by SEBI in February 2025, SIFs are positioned as a bridge between mutual funds and portfolio management services (PMS), offering flexibility in strategies such as long-short equity and derivative-based positioning. Targeted primarily at sophisticated and high-net-worth investors, they allow fund managers to deploy complex strategies while maintaining SEBI oversight.
Several mutual fund houses are now venturing into this space. Quant Mutual Fund became the first to launch an SIF — the QSIF Equity Long-Short Fund — in September 2025. Edelweiss Mutual Fund plans to roll out India’s first hybrid long-short SIF, while SBI Mutual Fund and Tata Mutual Fund have also expressed intentions to enter this category.
In a detailed explainer, CA Rachana Ranade outlined how SIFs fill the gap between regular mutual funds and high-ticket PMS products. “SIFs are designed for investors who can invest more than what a mutual fund allows but not as much as what a PMS demands,” she said, adding that the minimum investment requirement is Rs 10 lakh, compared with Rs 50 lakh for PMS.
Why SIFs were introduced
Ranade illustrated that while retail investors can start SIPs in mutual funds with as little as Rs 500, and PMS caters to ultra-HNIs investing Rs 50 lakh or more, there was no structured option for those in between. SIFs aim to fill this middle ground, providing exposure to advanced strategies and asset classes like equities, debt, REITs, InvITs, and derivatives.
However, unlike mutual funds, SIFs allow fund managers to take unhedged short positions, up to 25% of the portfolio, enabling them to benefit from falling markets. This gives SIFs an advantage during sideways or bearish market conditions — something traditional mutual funds cannot replicate.
SEBI’s framework for risk control
To ensure investor protection, SEBI has imposed strict limits. A single stock cannot exceed 10% of total assets, while REITs and InvITs together are capped at 20%, with no more than 10% per issuer. SIFs must also adhere to SEBI-specified expense ratios, ranging between 1.05% and 2.25%, depending on the fund size.
SIFs can follow three broad strategies — Equity Long-Short, Debt Long-Short, and Active Asset Allocation. Within the equity strategy, fund managers can choose between diversified long-short, midcap-focused, or sectoral approaches, allocating at least 80% to equities. The active asset allocator variant can dynamically switch between equity, debt, REITs, and derivatives, similar to balanced advantage or multi-asset funds.
SIF vs Mutual Fund vs PMS
While SIFs share some similarities with mutual funds in terms of pooled investments and expense-based fees, they offer far more flexibility. Mutual funds generally follow a long-only approach, while SIFs can short stocks and use derivatives for tactical positioning. PMS, on the other hand, offers full customization but demands higher capital and incurs tax on every portfolio transaction.
From a taxation perspective, SIFs enjoy the same treatment as mutual funds — investors pay capital gains tax only upon redemption, unlike PMS where tax is levied even when portfolio rebalancing occurs.
Should you invest in SIFs?
Ranade advises that SIFs are best suited for experienced investors with a higher risk appetite and a medium- to long-term investment horizon. “SIFs can perform well in sideways or bearish markets due to their flexibility in taking short positions,” she said. However, she cautioned that the category lacks a performance track record, as the first few schemes were only launched this year.
Financial experts recommend that SIFs be considered as an additional diversification tool, not a substitute for mutual funds. Investors are advised to allocate only a small portion of their portfolios until more performance data becomes available.
In essence, SIFs mark an evolution in India’s investment landscape — combining the structure of mutual funds with the strategic sophistication of PMS — but demand caution, patience, and understanding before entry.
Disclaimer: Business Today provides market and personal news for informational purposes only and should not be construed as investment advice. All mutual fund investments are subject to market risks. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.