India's fund management landscape is entering a new phase, with the Securities and Exchange Board of India (SEBI) introducing a distinct regulatory framework for Specialised Investment Funds (SIFs), effective April 1, 2025. SIFs are positioned to fill the long-standing regulatory gap between Mutual Funds and Portfolio Management Services (PMS), offering high-net-worth investors curated, strategy-driven, and risk-calibrated investment products under a structured mutual fund regime.
Eligibility Framework: Dual Entry Routes for AMCs
SEBI has provided two clear eligibility routes for Asset Management Companies (AMCs) to launch SIFs:
- Track Record-Based Route
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- Average AUM of ₹10,000 crore over the last 3 years.
- No regulatory action under SEBI Act Sections 11, 11B, or 24 in the past 3 years.
- Leadership-Based Route
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- CIO with ₹5,000 crore AUM experience and 10+ years in fund management.
- Supporting fund manager with ₹500 crore AUM and 3 years' experience.
- Clean regulatory record in the last 3 years.
This twin-track model encourages both seasoned institutions and boutique investment talent to participate.
Minimum Investment Threshold: High-Value, Informed Capital
To ensure only sophisticated investors participate, each strategy under a SIF requires a minimum investment of ₹10 lakh (Regulation 49X(1) of SEBI Mutual Fund Regulations).
Systematic Investment, Withdrawal, and Transfer Plans (SIP, SWP, STP) are permitted and subject to corpus maintenance.
SEBI-recognised accredited investors are eligible for certain exemptions.
Risk Exposure and Portfolio Diversification Caps
To maintain portfolio discipline and capital protection, SEBI mandates:
| Instrument Type | Maximum Allocation |
|---|---|
| AAA-rated Debt | 20% |
| AA-rated Debt | 16% |
| A and Below | 12% |
| Sector Concentration | 25% of NAV |
Permissible Investment Strategies
SIFs may offer strategies across three categories:
- Equity-Oriented
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- Long-short equity (min. 80% equity, max. 25% short).
- Ex-Top 100 funds for mid/small-cap exposure.
- Sector rotation across up to 4 sectors.
- Debt-Oriented
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- Directional and sectoral debt strategies.
- Short positions allowed within exposure limits.
- Hybrid Funds
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- One strategy per hybrid category per AMC to prevent over-diversification.
SIFs may be open-ended, close-ended, or interval-based, with flexible redemption windows (up to 15 working days).
Close-ended and interval schemes must be listed.
Brand Identity and Investor Transparency
To ensure investor clarity and brand segregation, the following are required:
- Unique name and logo for each SIF.
- Dedicated website or web page.
- Optional co-branding with mutual fund label (max. 5 years) with clear disclaimers.
Disclosure and Risk Labelling
Key requirements include:
- Monthly risk labels (scale 1 to 5).
- Annual strategy-wise disclosures (as of March 31).
- Liquidity and scenario-based analysis.
- Standardised disclaimers and SEBI-mandated warnings in every public communication.
Conclusion: Why SIFs Present a Strategic Opportunity in India
For fund houses and investment managers, setting up a Specialised Investment Fund (SIF) in India offers a timely opportunity to align with an evolving regulatory environment that actively supports innovation, investor protection, and differentiated strategies. As the Indian capital market matures, there is a growing demand for curated vehicles that offer institutional-grade governance, risk-calibrated allocations, and operational flexibility—all of which are embedded into the SIF framework.
From long-short equity to thematic debt and hybrid exposures, SIFs provide the regulatory foundation for building next-generation products aimed at informed, high-value investors. For institutions with the right intent, experience, and vision, this structure allows strategic first-mover advantage in a space poised to grow.
Designing and implementing a compliant SIF structure requires a sound understanding of regulatory expectations and market dynamics. With the right combination of legal insight, fund architecture, and market foresight, institutions can leverage the SIF regime as a compliance exercise and a strategic investment gateway.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
