Investors often diversify their portfolios by spreading investments across various categories, themes and instruments. The Securities and Exchange Board of India’s new Specialised Investment Fund (SIF) is an additional option for those willing to take higher risks in pursuit of potentially greater returns.
However, Edelweiss CEO Radhika Gupta advises that SIF should constitute only a small portion of an investor’s portfolio unless they have at least Rs 1-2 crore in liquid net worth. While SIF is a co-created product by SEBI and AMFI, designed to offer a blend of mutual funds and portfolio management services, it requires a minimum investment of Rs 10 lakh.
“Just because you have Rs 10 lakh doesn’t mean you should jump into SIF. Even if you start investing in it, it should remain a smaller part of your portfolio rather than its core. You need a liquid net worth of Rs 1-2 crore to allocate a significant portion of your corpus to SIF,” Gupta cautioned.
SIFs offer greater flexibility, allowing fund managers to explore diverse investment strategies across stocks, bonds, real estate, and private equity. Unlike traditional equity or fixed-income funds, SIFs provide access to advanced strategies such as REITs and derivatives like futures and options. However, this flexibility means SIFs may not be suitable for all investors.
According to Gupta, SIFs offer a unique structure, bridging the gap between mutual funds and Alternative Investment Funds (AIFs). While leverage is not permitted—ensuring exposure does not exceed 100%—the instrument provides greater flexibility than mutual funds while maintaining regulatory safeguards.
Typically, Category III AIFs have two segments: long-oriented funds and long-short funds. While SIFs do not interfere with long-only funds, they present a challenge to long-short funds by offering a mutual fund-friendly structure with a lower entry threshold of Rs 10 lakh. If structured properly, SIFs could also provide more favorable tax treatment, which Gupta considers a significant advantage.
Who should invest in SIFs?
Gupta makes it clear that SIFs are not designed for retail or small investors due to their high entry requirement. “This product is more suited for EMS or AIF investors, or those looking to hedge directly with F&O. Even experienced mutual fund investors can consider SIFs as a middle-ground solution between fixed income and equity investments,” she explained.
She also emphasised the importance of understanding risk and market volatility.
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