Context: Securities and Exchange Board of India (SEBI) recently allowed mutual funds to introduce a new asset class- Specialised Investment Fund. The product is to be launched from April 1, 2025.
Relevance of the Topic: Prelims: Specialised Investment Fund
About Specialised Investment Fund
- SIF is an investment option designed for people who understand the markets and are willing to take higher risks for potentially higher returns.
- Minimum investment at least ₹10 lakhs.
- Flexibility: Fund managers have more freedom to try new strategies compared to mutual funds. SIFs have a large investment range- stocks, bonds, real estate and private equity.
- Eligibility criteria for launching SIF:
- Only mutual funds operational for at least three years with ₹10,000 crore average AUM (Assets Under Management) in the preceding three years can launch SIF.
- New entrants can launch SIF only if they:
- Appoint a Chief Investment Officer (CIO) with 10 years of experience managing ₹5,000 crore assets.
- Have a fund manager with at least three years of experience handling ₹500 crore AUM.
Guidelines for SIF Investments:
- Debt instruments: SIFs can invest up to 20% of their assets in debt issued by a single entity. This limit can increase to 25% with approval from trustees. Investments in government securities and treasury bills are exempt from these restrictions.
- Equity investments: SIFs can hold up to 15% of a company’s paid-up capital with voting rights. SIFs can invest up to 10% of their Net Asset Value (NAV) in any one company’s equity shares.
- REITs and InvITs: SIFs can allocate 20% of their NAV to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). However, no more than 10% can be invested in a single issuer.
- Derivatives: Total exposure through derivatives cannot exceed 100% of the fund’s net assets.
SIF vs. Mutual Funds vs. Portfolio Management Services vs. Alternative Investment Funds
| Aspect | SIF | Mutual Funds | PMS | AIFs |
| Minimum Investment | ₹10 lakh | ₹500 or more | ₹50 lakh | ₹1 crore |
| Risk Level | High | Varies from low-moderate-high | Higher risk due to concentrated portfolio | High, depending upon the category |
| Flexibility | More freedom to fund managers in investment strategies | Limited by predefined strategies | High; tailored investment to meet specific financial goals | High flexibility, including investments in unlisted securities |
| Target Investors | Experienced investors | Retail and small investors | High-net-worth individuals (HNIs) | Institutional investors and HNIs |