SEBI Introduces New Asset Class: Specialized Investment Fund (SIF)

The Securities and Exchange Board of India (SEBI) has introduced a groundbreaking regulatory framework for a new asset class known as the Specialized Investment Fund (SIF). These funds aim to offer advanced investment strategies while ensuring investor protection, transparency, and risk controls.

Overview of Specialized Investment Funds (SIF)

Specialized Investment Funds (SIF) enable mutual funds to launch sophisticated investment strategies, catering to a broader range of investor preferences. These funds can operate under multiple structures, including:

Open-ended: (Continuous subscriptions and redemptions)
Closed-ended (Fixed investment period)
Interval Structure (Periodic subscription and redemption windows)

The introduction of SIF marks a significant step in diversifying the investment options available in the mutual fund industry while maintaining strong regulatory oversight.

Key Aspect	Details
Nomenclature	New asset class is officially named Specialized Investment Fund (SIF).
Investment Structures	Open-ended, Closed-ended, and Interval structures are allowed.
Minimum Investment	₹10 lakh across strategies (exception for accredited investors).
Distinct Branding	SIF must maintain a distinct identity from other mutual fund offerings.
Fund Manager Requirements	Must hold relevant NISM certification specified by SEBI.
Compliance	All existing mutual fund regulations apply unless stated otherwise.

Conditions for Specialized Investment Funds (SIF)

1. Minimum Investment Threshold

Investors are required to invest a minimum of ₹10 lakh across all strategies.
Exception: Accredited investors are exempt from this requirement.

2. Fund Manager Qualification

The fund manager handling SIF strategies must possess relevant NISM certification as mandated by SEBI.

3. Regulatory Compliance

Investment strategies under SIF must adhere to existing mutual fund regulations unless otherwise specified.

Launching Investment Strategies

To ensure smooth introduction of strategies under SIF, SEBI has outlined a structured launch process:

Strategies must follow the same approval procedure as mutual fund schemes under Regulation 28.
Investment strategies can be offered in Open-ended, Close-ended and Interval formats

Investment Restrictions Under SIF

SEBI has imposed stringent risk controls and exposure limits to safeguard investors and ensure diversification.

Asset Class	Restriction
Debt Instruments	Max 20% of NAV in debt instruments (per issuer, investment-grade). Can increase to 25% with prior approval of AMC Board and Board of Trustees. Exceptions: Government securities, treasury bills, triparty repo.
Company Ownership	Cannot own more than 15% of a company’s paid-up capital with voting rights across all strategies. If mutual funds already hold 10%, SIF can invest only an additional 5%.
Equity Instruments	No strategy can invest more than 10% of NAV in equity shares/equity-related instruments of a company.
REITs and InvITs	Max 20% of NAV in total REITs/InvITs investments. Max 10% of NAV per issuer. Total ownership across strategies cannot exceed 20% of units issued by a single issuer. Exception: Index funds and sector/industry-specific schemes.

Additional Requirements for SIF

Distinct Identity - SIF must maintain a clear and separate identity from other mutual fund offerings. Branding, advertising, and disclaimers must highlight this distinction.

Compliance Measures - Asset Management Companies (AMC) managing SIF must comply with SEBI’s requirements regarding: Branding, Advertising, Disclaimers , Website Maintenance

Offer Document - AMCs must provide an offer document with adequate disclosures, allowing investors to make well-informed decisions. It must emphasize the high-risk nature of the product.

Portfolio Disclosures - Portfolio disclosures must comply with SEBI-specified formats and timelines to ensure transparency.

Conclusion

The introduction of Specialized Investment Funds (SIF) reflects SEBI’s commitment to innovation in the mutual fund industry. By enabling advanced strategies while ensuring strict regulatory controls, SIF can cater to sophisticated investors seeking higher returns through customized approaches. The regulations emphasize risk management, transparency, and distinct branding to protect investor interests.

These funds are expected to open new avenues for fund managers and investors alike, adding diversity and flexibility to the evolving investment landscape in India.