Specialised Investment Funds Attract Indian Investors

Specialised Investment Funds (SIFs), introduced by Sebi on April 1, 2025, are rapidly gaining traction among investors across India. These funds bridge the gap between traditional mutual funds and high-barrier products such as Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).

Understanding SIFs and Their Flexibility

SIFs offer fund managers enhanced portfolio flexibility, enabling them to employ diverse investment strategies. This flexibility allows for dynamic market engagement while maintaining regulatory safeguards inherent to mutual funds.

• Long-short equity derivatives are utilized to manage market exposure.
• Multi-asset allocation strategies diversify holdings across different asset classes.
• Commodity derivatives provide exposure to raw materials and hedging opportunities.

The ability to use derivatives for hedging is a core mechanism, designed to limit losses during volatile market conditions or downturns. This approach aims to deliver steadier, risk-adjusted returns for investors.

Growth and Investor Profile

The SIF segment has demonstrated significant growth since its introduction. Its assets under management (AUM) have expanded, reflecting increasing investor interest in these structured products.

• As of June 2026, SIF segment AUM reached ₹17,858 crore.
• This represents a 29% increase from May 2026.
• Currently, 27 schemes are available within the SIF category.

Early adopters of SIFs are primarily experienced investors and High-Net-Worth Individuals (HNIs). These individuals seek diversified and resilient portfolio outcomes, aligning with the strategic capabilities of SIFs.

Regulatory Framework and Tax Benefits

SIFs operate under the regulatory oversight of mutual funds, ensuring investor protection. This framework provides a level of security not always present in less regulated investment vehicles.

Moreover, SIFs offer tax efficiency comparable to mutual funds. Long-term capital gains are taxed at 12.5% after one year, presenting an advantage over the tax structures typically associated with PMS.

Distribution Hurdles and Future Outlook

Despite their appeal, SIFs face challenges in distribution. Distributors require a stringent certification, which currently limits their numbers compared to the broader mutual fund distribution network.

Industry discussions are underway with Sebi and NISM to streamline the certification process. Such efforts aim to expand the reach and accessibility of SIFs to a wider investor base.

However, investors are advised to exercise caution. No SIF currently has a one-year live performance record, making long-term evaluation difficult. Additionally, while hedging mechanisms limit downside, they can also cap upside during strong bull markets. Investors should evaluate SIFs based on risk-adjusted returns over a full market cycle.