A Detailed Guide on Specialised Investment Funds (SIFs)
Reading Time: 4 minutesThe Securities and Exchange Board of India (SEBI) has introduced Specialised Investment Funds (SIFs), a new investment option designed to fill the gap between traditional mutual funds and more personalised, high-end Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs).
The world of investments can often seems overwhelming, with new products and categories being introduced regularly. The latest entrant is the Specialised Investment Fund (SIF), a higher risk investment product introduced by SEBI, aimed specifically at affluent investors looking for advanced and potentially higher return investment options.
What Are Specialised Investment Funds (SIFs)?
SIFs provide advanced investment strategies, like investing in stocks, fixed income products, Real Estate Investment Trusts (REITs), and even Derivatives (futures and options). Though SIFs share some similarities with mutual funds, they take on higher risks in exchange for potentially higher returns.
You might be wondering whether this is the right option for you and how it compares to investment like mutual funds, PMS, or AIFs. The key difference is that SIFs have a minimum investment of ₹10 lakh, making them more accessible than PMS or AIFs, which require ₹50 lakhs and ₹1 Crore respectively.
How Do SIFs Work?
- Higher Risk, Potentially Higher Reward – SIFs are designed for those who are comfortable with taking on more risk for the chance of better returns. Depending on the strategy chosen by the Asset Management Company (AMC), the fund can be more aggressive than a regular mutual fund.
- Diversification and Customisation – SIFs provide exposure to different asset classes, such as stocks, bonds, REITs, and even Derivatives. This allows for more investment options compared to mutual funds, which are more limited in their investment options.
- Fund Structure and Taxation – Like mutual funds, SIFs follow a similar structure for investing and redeeming funds. The tax treatment is also aligned with mutual fund regulations, making it easier for investors to manage.
How does SIFs compare with Mutual Funds and PMS?
This combination of risk, customisation, and tax benefits makes SIFs an appealing option for those looking to enhance their portfolios. Here’s a quick comparison to illustrate the key differences-
| Particulars | Product | |||
| SIFs | Mutual Funds | PMS | AIF | |
| Minimum Investment | ₹10 Lakhs | ₹500 | ₹50 Lakhs | ₹1 Crore |
| Suitable for | Affluent investors | Retail Investors | High Net Worth Individuals (HNIs) | HNIs and Institutions |
| Investment Products | Stocks, Fixed Income, REITs, InVITs, & Derivatives | Stocks, Fixed Income, REITs, & InVITs | Stocks, Fixed Income, REITs, InVITs, Derivatives | Stocks, Fixed Income, Startups, Commodities |
| Risk-Return profile | Medium to Very High | Very Low to High | Medium to Very High | Medium to Very High |
| Customisation | Flexible | Limited | Personalised | Personalised |
| Tax Implications | Expected to be like Mutual Funds | Capital Gains applicable on redemption | Depends upon investment portfolio | Depends upon investment portfolio |
SEBI’s Safeguards for Investors
To protect investors, SEBI has placed certain limits on SIFs-
- Investment Limits – SIFs cannot invest more than 10% of their total value in any one listed company’s shares or 20% in any single debt issuer (with exceptions for government securities).
- Certified Fund Managers – Fund managers of SIFs must be certified by the National Institute of Securities Markets (NISM), ensuring they have the necessary expertise to manage these complex investments.
Why Are SIFs Important?
SIFs address a long-standing demand for an investment product that offers something more than mutual funds but is more affordable than PMS. They combine the flexibility and advanced strategies of PMS with the lower entry barriers of mutual funds, making them an attractive option for investors who want to explore high-risk, high-reward opportunities without needing to invest large sums.
Conclusion
Specialised Investment Funds (SIFs) represent a fresh introduction in India’s investment options. They give investors an opportunity to diversify and take on more risk in exchange for potentially higher returns with their ability to use more complex investment strategies and lower minimum investment limits. As always, it’s important to consider your risk profile and investment goals before diving into such products. If you’re interested in exploring SIFs, it’s essential to seek advice from a trusted financial advisor who can guide you through the process.
How Can Zenith Finserve Help You?
At Zenith, we believe that every investor deserves expert guidance to make the most of their money. SIFs, while exciting, are not for everyone. These high-risk investments require a deep understanding of market movements and a clear risk appetite. Our role is to help you assess if SIFs align with your financial goals and whether the associated risks are acceptable for your portfolio.
Our team of certified financial planners and investment experts will walk you through the nuances of these funds, helping you diversify your investments and strike the right balance between risk and reward. Whether you’re interested in traditional mutual funds, PMS, or exploring SIFs, we’ve got you covered.
FAQs on Specialised Investment Funds (SIFs)
Is SIF a good investment for small investors?
SIFs are designed for investors who are willing to take on more risk in exchange for potentially higher returns. If you have a high-risk tolerance and want more flexibility in your investment strategy, SIFs could be a good fit.
What is the minimum investment for SIFs?
The minimum investment for most investors is Rs 10 Lakhs.
How do SIFs differ from Mutual Funds and PMS? SIFs combine elements of both. Like PMS, they offer more flexibility and high-risk strategies but are more tax-efficient, like mutual funds.
What are the risks associated with SIFs?
SIFs are high-risk by nature and include investments in derivatives and other high-risk assets. As with any investment, there is a possibility of losing your capital.
How are SIFs taxed?
SIFs enjoy the same tax efficiency as mutual funds. You only pay capital gains tax when you redeem the fund, not on every transaction within the fund.