How SIFs are positioned
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What product gap do SIFs ll?
MFs have fairly prescriptive mandates. PMS and AIF offer more exibility, but have a much higher minimum investment and a different operating structure. SIFs bridge this gap by letting fund manag ers pursue strategies that would be hard or impossible within conventional MF categories, while retaining the pooled fund structure and regulatory framework of MFs. Similar to MFs, SIF investors incur no tax until they sell their investment.
How they differ from MFs
While mass-market MFs are restricted to ‘long-only’ strategies, SIFs can pursue both ‘long’ and ‘short’ bets. Unlike regular MFs, SIFs are allowed to sell shares without holding the underlying assets— termed as naked short positions—up to 25% of the portfolio. So, fund managers don’t just bet on a rising market, they can also gain from falling stock prices.
SIFs are also allowed to harness a wide range of derivative strategies to pursue opportunities across rising, falling and sideways markets. Compared to MFs, SIFs can run more concentrated portfolios targeting niche themes and special situations. These can invest up to 20% of the fund NAV in a single debt security and up to 15% in a single company’s shares, as against 10% each in case of a MF.
With this exibility, SIF managers can take positions and construct portfolios beyond the relatively tight boundaries of conventional MF categories. They can take stronger views on sectors, stocks, factors, duration or market direction rather than being constrained by stand ard category de nitions. Long-short and derivative-based strategies can poten tially be used to mitigate risk and seek returns in different market conditions.
Who can invest?
The standard minimum investment threshold is Rs.10 lakh across an investor’s SIF investments with an asset manage ment company. One can also initiate SIP for smaller denominations once the initial threshold is met.