Specialized Investment Fund (SIF) Explained: New Investment Category Between Mutual Funds & PMS

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🔹 1. What is Specialized Investment Fund (SIF)?

✅ New Investment Category introduced by SEBI 🏦
✅ Bridges the gap between Mutual Funds (MFs) 🏢 and Portfolio Management Services (PMS) 💼
✅ Provides more flexibility than MFs but isn’t as tailored as PMS
✅ Comes into effect from April 1, 2025 📅

🔹 2. Who Can Launch an SIF? (Eligibility) 🏛️

A Mutual Fund (MF) registered under SEBI can launch an SIF if it meets either of these:

🛤️ Route 1: Strong Track Record

✔️ 3+ years of operations ⏳
✔️ Average AUM of ₹10,000 crore in the last 3 years 💰
✔️ No regulatory action against the AMC/Sponsor in the last 3 years ❌🚔

🛤️ Route 2: Expert Team

✔️ Appoints a Chief Investment Officer (CIO) 👨‍💼

  • 10+ years experience managing at least ₹5,000 crore AUM
    ✔️ Hires an additional Fund Manager 👩‍💼
  • 3+ years experience managing at least ₹500 crore AUM

🔹 3. Branding & Advertisement 📢

✅ SIF must have a distinct brand name & logo separate from its MF business 🎨
✅ For first 5 years, AMCs can mention their Mutual Fund brand in SIF promotions ✍️

  • Example: "XYZ SIF – Brought to you by ABC Mutual Fund"
    ✅ The font size of the MF’s name must be equal or smaller than the SIF’s brand name 🔠
    ✅ SIF must have a separate website 🌐 from the Mutual Fund

🔹 4. Investment Strategies Under SIF 📊

SEBI has categorized investment strategies into:

📈 Equity-Oriented Strategies

1️⃣ Equity Long-Short Fund:

  • At least 80% in equity 📊
  • Max 25% short exposure in derivatives 🔻

2️⃣ Equity Ex-Top 100 Long-Short Fund:

  • At least 65% in mid & small-cap stocks 🏢
  • Max 25% short exposure in non-large cap stocks 🏦

3️⃣ Sector Rotation Long-Short Fund:

  • Invests in up to 4 sectors 🏗️💡🏦
  • 80% minimum sectoral allocation
  • Max 25% short exposure per sector

💵 Debt-Oriented Strategies

1️⃣ Debt Long-Short Fund:

  • Invests in debt instruments & derivatives 💰
  • Allows short selling through exchange-traded debt derivatives

2️⃣ Sectoral Debt Long-Short Fund:

  • Invests in at least 2 debt sectors 🏦
  • Max 75% allocation to one sector

⚖️ Hybrid Strategies

1️⃣ Active Asset Allocator Long-Short Fund:

  • Dynamic allocation across Equities, Debt, REITs, Commodities 📉📈🏠
  • Max 25% short exposure

2️⃣ Hybrid Long-Short Fund:

  • Min 25% in Equity & Debt each 🏦
  • Max 25% short exposure

🔹 5. Minimum Investment Requirement 💰

✔️ Minimum investment per investor: ₹10 Lakh 🔟💵
✔️ Applies PAN-wise across all SIF strategies
✔️ If the value falls below ₹10L (due to redemption):

  • The investor must exit fully, no partial redemption allowed 🚫✂️

🔹 6. Investment Restrictions 🚫

✔️ Debt Securities Limits:

  • Max 20% of NAV in AAA-rated securities
  • Max 16% in AA-rated securities
  • Max 12% in A-rated & below

✔️ Sectoral Cap: Max 25% in one sector

🔹 7. Derivative Exposure 📉

✔️ Up to 25% of Net Assets in derivatives (beyond hedging & rebalancing)
✔️ Exposure to be calculated as:

  • Futures: Price × Lot Size × Number of Contracts
  • Options Bought: Premium Paid × Lot Size × Number of Contracts
  • Options Sold: Market Price × Lot Size × Number of Contracts

✔️ Allowed Offsetting Transactions:

  • Equity Long vs Futures Short ✅
  • Futures Short vs Call Option Long ✅
  • Call Option Long vs Call Option Short ✅

🚫 Not Allowed:

  • Equity Long + Futures Long
  • Futures Short + Call Option Short

🔹 8. Subscription & Redemption Rules 💳

✔️ Flexible Redemption Options:

  • Daily, Weekly, Monthly, or Custom Intervals 📅
    ✔️ Subscription & redemption frequencies can be different
  • Example: Daily investments, weekly withdrawals
    ✔️ Notice Period for Redemption (Max 15 days) 📆

🔹 9. Listing & Benchmarking 📊

✔️ Close-ended & interval SIFs must be listed on Stock Exchanges 📈
✔️ Benchmarking:

  • Equity SIFs → Nifty / Sensex / BSE 100 📉
  • Debt SIFs → Broad Market Debt Index
  • Hybrid SIFs → Suitable Broad Market Index

🔹 10. Distribution Rules 💼

✔️ Only Mutual Fund Distributors who pass NISM Series-XIII can sell SIFs 🎓

🔹 11. Risk & Disclosures ⚠️

✔️ Risk-Band System (Like Mutual Funds) 🔴🟠🟡🟢🔵

  • Level 1 (Low Risk) 🟢
  • Level 2 🟡
  • Level 3 🟠
  • Level 4 🔴
  • Level 5 (High Risk) 🚨

✔️ Disclosures Required:

  • Portfolio details every alternate month 📋
  • Scenario analysis for derivative impact 📊
  • Standard Disclaimer in ads:
    🚨 "Investments in SIF involve high risk, including potential loss of capital."

🎯 Final Takeaway:

✔️ SIFs are a hybrid of Mutual Funds & PMS
✔️ More portfolio flexibility but with higher risk 📊🔥
✔️ Strict compliance & regulatory oversight by SEBI 🏦👀
✔️ Great for HNI & institutional investors (₹10L minimum investment)

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