Each product serves a different investor profile and offers different levels of flexibility:

• Mutual Fund: Long-only, fully regulated, no short selling, accessible to all retail investors
• PMS: Customised, direct stock ownership, ₹50L minimum, no short selling allowed
• AIF: Leverage and shorting permitted, complex structure, ₹1 Crore minimum, less liquid
• SIF: SEBI-regulated, allows limited shorting depending on investment strategy, ₹10L minimum subscription, ( Refer respective SEBI regulations for details)

SIFs provide sophisticated investors with access to strategies beyond traditional long-only mandates, while maintaining the robust governance of the mutual fund framework.

Over the years, a gap has emerged between MFs and PMS in terms of portfolio flexibility, creating an opportunity for a new investment product. To bridge this gap, the SEBI (Mutual Funds) Regulations, have been amended to introduce the broad regulatory framework for the new investment product – Specialized Investment Fund

While SIF is a newly introduced SEBI product category, the underlying strategy — equity long-short — is one of the most widely used strategies globally by hedge funds and institutional managers. The structure is backed by SEBI regulation and governed with the trustee, custodian, auditor, and daily business day NAV disclosure framework as mutual funds. It is a structural category.

If your investment value falls below ₹10 lakh because of market movements (this is called a passive breach), you have the following choices:

• Do nothing: You can continue holding your investment without taking any action.
• Top up: You may add more money to bring the investment value back above ₹10 lakh.
• Exit:. You shall only be permitted to redeem the entire remaining investment amount from the SIF.

There is no penalty and no compulsory top-up or exit just because markets have gone down.

SEBI has permitted seven distinct SIF strategies, classified into Equity-Oriented, Debt-Oriented, and Hybrid strategies, as detailed below.

A. Equity-Oriented Strategies

• Minimum investment in equity and equity-related instruments: 80%
• Maximum short exposure through unhedged derivative positions in equity and equity-related instruments: 25%

• Minimum investment in equity and equity-related instruments of stocks excluding the top 100 stocks by market capitalisation: 65%
• Maximum short exposure through unhedged derivative positions in equity and equity-related instruments of other than large-cap stocks: 25%

• Minimum investment in equity and equity-related instruments of a maximum of four sectors: 80%
• Maximum short exposure through unhedged derivative positions in equity and equity-related instruments: 25%*

* Short exposure shall apply at the sector level, covering all stocks within that sector held in the portfolio. For example, if the fund takes a short position in the Auto sector, all Auto sector stocks in the portfolio must be held as short positions.

B. Debt-Oriented Strategies

• Investment in debt instruments across duration, including unhedged short exposure through exchange-traded debt derivative instruments

• Investment in debt instruments of at least two sectors, with maximum investment of 75% in a single sector
• Maximum short exposure through unhedged derivative positions in debt instruments: 25%*

* Short exposure shall be across the sector and applicable to all instruments of that particular sector held in the portfolio. For example, if the fund is short on the Auto sector, then all debt instruments of the Auto sector held in the portfolio shall be held as short positions.

C. Hybrid Strategies

• Dynamic investment across the following asset classes:
  • Equity
  • Debt
  • Equity and debt derivatives
  • REITs/InVITs
• Maximum short exposure through unhedged derivative positions in equity and debt instruments: 25%

• Minimum investment in equity and equity-related instruments: 25%
• Minimum investment in debt instruments: 25%
• Maximum short exposure through unhedged derivative positions in equity and debt instruments: 25%

(Note: Refer SEBI circular dated February 27, 2025 on Regulatory framework for specialized Investment Funds (SIF) for details)

B. Investment Rationale & Strategy

SIFs may offer more flexibility than traditional long-only equity funds. They can use derivatives, hedging, and short positions (within regulatory limits) to manage risk and aim for risk-adjusted returns across different market cycles. SIFs are suitable for investors who understand advanced strategies and higher risks.

A long–short strategy seeks to reduce dependence on overall market direction with an aim to combine

• Long positions in securities expected to outperform, and
• Short positions in securities expected to underperform

This approach aims to generate returns from relative performance between securities rather than relying solely on broad market movements while at the same time reducing the overall portfolio risk. Short positions may help enhance portfolio value and may also act as natural hedge protecting the fund during sudden market falls

SIF performance is not entirely dependent on overall market direction. While market conditions, expectations, and equity market movements do impact returns, SIF outcomes also depend on the investment strategy and risk management. SIFs aim to deliver risk-adjusted returns over market cycles; however, returns are not guaranteed and may vary with market conditions.

No. Short positions are not compulsory in an SIF. SEBI permits SIF strategies to take unhedged short exposure of up to 25% of net assets, but the actual use of short positions depends on the specific investment strategy and prevailing market conditions.

The long–short exposure mix is dynamic and determined by the fund manager in line with the stated strategy and regulatory limits. Long and short exposures may vary over time, and net market exposure may be actively adjusted based on market opportunities and risk considerations. Exact exposure levels are disclosed periodically in portfolio disclosures.

C. Risk, Market Behaviour & Volatility

• Potential for lower net exposure resulting in underperformance in strong bull markets
• Shorting exposes the fund to potential underperformance compared to a long-only benchmark

SIFs may perform differently during volatile markets:

• Long–short strategies may provide risk mitigation during downside protection
• Short positions may perform in falling markets
• However, complexity may also increase volatility
• Risk management becomes crucial during such periods

D. Investment Horizon & Suitability

SIFs are intended for investors with a long-term investment horizon, typically five to seven years or more, allowing the strategy to perform across different market cycles.

E. Distribution, Eligibility & Operations

Only NISM certified AMFI registered mutual fund distributors can sell SIF products. They must have:

• NISM Series-XIII: Common Derivatives Certification
• Understanding of complex investment strategies
• Ability to explain risks and suitability to investors
• Empanelled with the AMC

Why this matters: This ensures you get proper guidance from knowledgeable distributors who understand the complexities of SIF investments.

Standard KYC documents plus:

• Bank statements showing investment capacity
• Income proof for risk assessment
• Investment experience declaration
• Risk profiling questionnaire

Yes, NRIs can invest in SIFs subject to among others:

• Compliance with FEMA regulations
• Proper NRI KYC completion
• Investment through NRE/NRO accounts
• Same minimum investment threshold of ₹10 lakh
• Additional due diligence , if any.

Yes, you can switch between SIF strategies offered by the same AMC, subject to:

• Maintaining the minimum investment threshold
• Exit load conditions (if any)
• Tax implications of the switch etc.

NAV calculation follows mutual fund principles: The Net Asset Value (NAV) per Unit under the Investment Strategy will be computed by dividing the net assets of the Investment Strategy by the number of Units outstanding on the valuation day . valuation as per valuation policy.

• Daily marking-to-market of all positions
• Long and short positions netted appropriately for calculating exposure.
• Derivative positions valued at market rates
• Published on business days like regular mutual funds