What are Specialized Investment Funds and what makes them special?
What's the story
Starting April 1, investors looking for advanced investment options can look into Specialized Investment Funds (SIFs), a new category in the financial market.
SIFs act as a bridge between mutual funds and portfolio management services (PMS) with an entry point of ₹10 lakh.
The new offering is aimed at those willing to take higher risks for potentially greater returns.
Regulatory guidelines
SEBI unveils regulatory framework for SIFs
The Securities and Exchange Board of India (SEBI) has introduced a regulatory framework for SIFs.
These funds will enable fund houses to implement advanced investment strategies via open-ended, closed-ended, or interval structures.
The introduction of SIFs marks the beginning of a new era in the mutual fund industry, said Niranjan Avasthi from Edelweiss MF.
Investment strategies
Implementing differentiated equity strategies
SIFs will follow differentiated equity strategies, including the Equity Long-Short Fund that can invest minimum 80% in equity with up to 25% shorts through derivatives.
The Ex-Top 100 Long-Short Fund is another category under SIF that can invest minimum 65% in stocks outside top 100 by market cap.
Sector rotation long-short funds under SIF can also invest minimum 80% in up to four sectors with max 25% short exposure at the sector level.
Distinct advantages
SIFs to offer unique features compared to mutual funds
SIFs will offer unique features like a 25% derivatives exposure and the ability to leverage and generate more returns on the long side.
However, this also brings in potential risks that need to be managed carefully.
Santosh Joseph from Germinate Investor Services noted that SIFs have different investment limits, giving fund managers more flexibility.