Specialised Investment Fund (SIF): A New Investment Asset Class

SEBI introduces Specialised Investment Funds (SIFs) as a middle ground between MFs and PMS, offering higher exposure limits, flexible structures, and advanced investment strategies for high-risk investors

The Securities and Exchange Board of India (SEBI) has introduced a new asset class called the Specialised Investment Fund (SIF). Positioned between Mutual Funds (MFs) and Portfolio Management Services (PMSes), SIFs offer advanced investment strategies to investors with a higher risk appetite. This framework aims to bridge the gap between traditional investment options and high-net-worth investment vehicles.

Key Features of SIFs

• Investment Threshold: The minimum investment threshold in SIFs is set at Rs 10 lakh across various strategies, except for accredited investors who may have different requirements.
• Flexibility in Investment Structures: SIFs can operate in open-ended, closed-ended, or interval structures, providing flexibility in managing investments.
• Higher Allocation Limits: Compared to MFs, SIFs allow asset managers to allocate a greater percentage of funds into a single security or issuer.
• Enhanced Exposure to REITs and INVITs: Permissible investment limits for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) have been doubled to 20 per cent.
• Regulated by SEBI: Fund managers handling SIFs must possess the relevant National Institute of Securities Markets (NISM) certification.

Comparison: SIFs vs. MFs

Role of Accredited Investors

Accredited investors are individuals or entities with a deep understanding of financial products, allowing them to make informed investment decisions. SEBI recognizes them as qualified participants in higher-risk investments. The SIF framework permits accredited investors to access these funds without the Rs 10 lakh minimum threshold.

Potential Benefits of SIFs

• Broader Investment Strategies: Portfolio managers can develop and implement strategies beyond the limitations of traditional mutual funds.
• Higher Concentration Allowance: With increased exposure limits, SIFs enable concentrated thematic investing, benefiting experienced investors.
• Diversification Opportunities: SIFs provide greater access to alternative investment avenues such as REITs, INVITs, and structured debt.
• Potential for Innovation: The framework allows for more tailored and sophisticated financial products that cater to specific investor needs.

Challenges and Considerations

• Lack of Derivatives Clarity: Unlike PMS and AIFs, the current SIF framework does not explicitly permit derivatives-based investment strategies.
• Higher Risk Exposure: The higher allocation limits can lead to increased volatility and concentrated portfolio risk.
• Limited Retail Participation: The Rs 10 lakh minimum investment may restrict participation from retail investors who prefer lower entry barriers.

Conclusion

The introduction of Specialised Investment Funds marks a significant evolution in India's investment landscape. By offering a structured yet flexible investment vehicle with increased exposure limits, SIFs bridge the gap between MFs and PMSes. While the new asset class presents enhanced opportunities for high-net-worth individuals (HNIs) and experienced investors, its regulatory clarity on derivatives and investor education will play a crucial role in its adoption. As the market evolves, SIFs may become an integral part of sophisticated investment portfolios in India.

Disclaimer: The article is for informational purposes only and not investment advice.