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
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Feature
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Specialised Investment Fund (SIF)
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Mutual Funds (MFs)
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Minimum Investment
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Rs 10 lakh
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As low as Rs 500
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Investment Allocation
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15 per cent in a single security (equity) and up to 20 per cent in a single issuer (fixed income)
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10 per cent in a single security, 10 per cent in a single issuer
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REITs/INVITs Exposure
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20 per cent
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10 per cent
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Structure
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Open-ended, closed-ended, or interval
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Open-ended or closed-ended
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Expense Ratio
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Similar to MFs
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Varies based on scheme size
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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.