Specialised Investment Funds (SIFs) Rise in India

Specialised Investment Funds (SIFs) are rapidly gaining investor interest across India, bridging a crucial gap in the investment landscape. The Securities and Exchange Board of India (Sebi) officially introduced these funds on April 1, 2025.

SIFs serve as an intermediary product, positioned between conventional mutual funds and more exclusive offerings like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs). They combine the robust regulatory framework of mutual funds with the strategic flexibility typically found in higher-barrier products.

Unpacking SIFs’ Investment Flexibility

A key advantage of SIFs is their ability to empower fund managers with diverse investment strategies. This flexibility allows for dynamic portfolio management tailored to market conditions.

• Long-short equity derivative strategies
• Multi-asset allocation
• Commodity derivatives

The capacity for derivative investment acts as a crucial hedge, aiming to offset potential losses during market downturns. This mechanism limits volatility and fosters steadier, risk-adjusted returns over a complete market cycle.

Growth Trajectory and Financial Metrics

The adoption of SIFs reflects an evolving Indian investor base, increasingly aware of asset allocation and risk management. Their introduction has spurred significant growth in a short period.

• Sebi launched SIFs on April 1, 2025.
• India’s inaugural SIF, QSIF Equity Long–Short Fund, debuted in September 2025.
• By June 2026, the market featured 27 distinct SIF schemes.
• These schemes collectively managed a net Assets Under Management (AUM) of ₹17,858 crore by June 2026.

SIFs also present a favorable expense structure and taxation model, closely mirroring traditional mutual funds. Investors are subject to taxation only upon the redemption of their units, not on individual trades.

Long-term capital gains face a 12.5% tax rate if redeemed after one year, offering a more advantageous structure than PMS, where every trade is taxed.

Crucial Considerations for Prospective Investors

Despite their appeal, prospective investors should exercise caution as no SIF currently possesses a one-year live performance record. The very hedging strategies designed to protect against downturns also inherently cap potential upside during extended bull markets.

The industry also grapples with distribution challenges, as the number of SIF distributors remains limited compared to the expansive network for mutual funds. Efforts are, however, underway to broaden this network and streamline certification processes to enhance accessibility.

This evolution underscores the growing sophistication of Indian investors, who are increasingly aware of the importance of precise asset allocation, robust risk management, and the pursuit of diversified return streams. SIFs represent a tailored solution for those seeking regulated flexibility in their investment portfolios.