The Rise of SIFs: Should you dive into Specialised Investment Funds?

Specialised Investment Funds (SIFs) give investors access to investment strategies that go beyond conventional mutual funds, while remaining within SEBI’s mutual fund framework. They can use long-short, sector rotation and tactical strategies, with a minimum investment of ₹10 lakh. Since these strategies may involve derivatives, short positions and different redemption frequencies, SIFs come with their own risks and liquidity considerations and are better understood before making an investment decision.

Specialised Investment Funds (SIFs) are emerging as a new investment option for investors seeking more than traditional mutual funds, without moving fully into Portfolio Management Services (PMS). Introduced by SEBI in 2025, SIFs are positioned as a middle ground—offering greater strategy flexibility with a lower entry threshold.

While operating within SEBI’s regulatory framework, SIF investment structures allow access to advanced, strategy-driven approaches that were earlier limited to PMS or alternative funds. This has brought SIFs into focus for investors evaluating where and how to allocate capital more strategically.

But just because SIFs are becoming popular, does this mean you should invest in them? That’s what we find out in this article. We assess what are SIFs, who should consider them, and what are the factors to review before investing in detail.

SEBI-regulated specialised investment funds or SIFs are investment vehicles that follow strategy-specific approaches such as long-short equity, sector rotation, and tactical asset allocation. 

While SEBI regulates SIFs under the mutual fund framework, these funds operate differently. Traditional MFs use long-only strategies and can use derivatives only to hedge their positions. But SIFs, on the other hand, can take active short positions with the goal of generating returns in both rising and falling markets.

Depending on the scheme structure, SIF investment options may be open-ended or interval funds with defined liquidity terms. Managed by SEBI-regulated AMCs, SIFs combine flexibility with oversight, making them suitable for experienced investors exploring 10 lakh investment ideas beyond conventional mutual funds.

If you’re thinking about making a Rs. 10 lakh lump-sum investment in SIFs, you should first understand these aspects of SIF investments properly:
 

1. Minimum Investment Limit

Firstly, SIF investments are more accessible than PMS investments (which start from Rs. 50 lakhs) and AIF investments (which start from Rs. 1 Cr). For SIF investments, the minimum investment limit is set at Rs. 10 lakh. 

But this is not like making a Rs. 10 lakh investment in mutual funds. SIFs use advanced investment approaches that often come with higher risk exposure (due to unhedged derivatives) than traditional MFs. That’s why they are intentionally designed with a higher minimum investment threshold than MFs to ensure investor suitability.

So, if you’re looking for an investment plan for Rs. 10 Lakhs that offers you more flexibility than conventional MFs and have the required knowledge and risk appetite, then SIFs may be worth considering.

2. SIF Strategies allowed by SEBI

Next, you also need to know that not all SIFs are the same. SIFs fall into the following categories: 

• Equity

• Debt

• Hybrid 

Even within these broad categories, SIF investment schemes can tailor their investment approaches to their objectives and structures.

Here’s a quick overview of the SEBI-approved investment structure for different types of SIFs:

3. Liquidity in SIFs

Unlike mutual funds that allow daily redemptions at prevailing NAV, liquidity in specialised investment funds may be limited. Liquidity or redemption frequency depends on the SIF’s structure and strategy. Some SIFs may offer daily redemptions, while others allow withdrawals only at fixed intervals.

Here are a few liquidity considerations to keep in mind:

• Exit flexibility varies across SIF strategies

• Redemption frequency may be daily, weekly, monthly, or quarterly depending upon strategy

• Some SIFs require an advance redemption notice (of up to 15 working days)

So if you’re considering SIF as a part of your Rs.10 lakh investment idea, remember to assess your liquidity requirements as well. For those who need (or anticipate needing) cash urgently, SIFs may not be well-suited.

4. Portfolio Fit

Before investing in any Rs. 10 lakh investment plan, it’s important to understand how the plan fits into your existing portfolio. For instance, since SIFs can take active short positions, they may carry more risks than conventional MFs. This means, they may be better suited as satellite allocations, rather than core holdings in one’s portfolio. 

So, how do you know about the portfolio fit of SIF investment plans? It’s simple. You ask yourself these key portfolio-fit questions:

• What percentage of my portfolio should this represent?

• Do I already have adequate exposure to traditional strategies?

• Am I comfortable with periods of underperformance versus long-only funds?

• Do I understand that short positions can amplify losses if wrong?

Answering these questions honestly can help determine whether a SIF investment aligns with your risk appetite and long-term objectives.

5. Risks Associated with SIFs

If you are confused between an Rs. 10 lakh investment in mutual funds and Rs. 10 lakh investment in SIFs, know that the risk quotient in both varies. MFs can invest in derivative positions for hedging. But SIFs are allowed to take up to 25% unhedged derivative positions, as per SEBI.

While this long-short approach may help potentially manage downside risk, it is riskier than long-only MFs. Here are some of the key risks associated with specialised investment funds you should remember:

• Use of leverage, derivatives, and short positions introduces strategy-specific risks

• Limited liquidity in certain strategies 

• No adequate track record, as this is a newly launched investment product

Just like MFs have to use a pictorial riskometer to show their potential risks, SIFs, too, have to use ‘risk band’ to depict their associated risks. As per SEBI, these risk bands are graded on a level 1 to level  5 scale, with 1 being the lowest risk and 5 being the highest risk.

So, remember to carefully review the Investment strategy offer document to assess this risk band and ensure it aligns with your risk appetite before investing in a specialised investment fund.

Here’s a quick overview of how SIF investments compare to other alternatives like mutual funds, PMS, and AIFs:

SIF investment may be more suitable for investors who:

• Are exploring advanced ₹10 lakh investment ideas and can commit the capital

• Have a clear understanding of strategy-led and non-traditional investments

• Are HNIs or institutional investors seeking options beyond conventional mutual funds

• Are comfortable with periods of volatility and variable liquidity

• Have long-term capital available for deployment

• Prefer diversification driven by defined investment strategies

SIFs may not be suitable for investors who:

• Are first-time investors with a limited understanding of market dynamics

• Have low risk tolerance and are uncomfortable with short-term volatility

• Require high liquidity or frequent access to invested capital

• Have smaller portfolios where SIF exposure may outweigh allocations, increasing potential risks

• Prefer simple, long-only investment approaches

Specialised Investment Funds are still evolving, and their strategy-driven nature, especially the use of derivatives, adds a layer of complexity. While new investment products often attract attention and excitement, that alone isn’t a reason to participate immediately. It’s important to take time to understand how these funds operate, how they perform across market cycles, and whether they truly fit your financial goals.

So, if you have Rs.10 Lakhs and don’t know where to invest, first check your investment goals, time horizon, liquidity needs, and risk appetite. Reviewing these factors will automatically help you narrow down your preferred investment vehicles.

1. What is a Specialised Investment Fund in 2026?

A Specialised Investment Fund (SIF) is a SEBI-regulated investment product offered under the mutual fund framework, but with more flexible investment strategies than regular mutual funds. Depending on the strategy, a SIF can invest across equity, debt and other permitted assets and can also take limited short positions through derivatives. This allows SIFs to follow strategies such as long-short equity or tactical asset allocation, within SEBI-prescribed limits.

2. What is the minimum investment for a SIF?

The minimum investment is ₹10 lakh per investor at PAN level, calculated across all investment strategies offered by the same SIF. This minimum does not apply to accredited investors.

3. How is a SIF different from a PMS or an AIF?

The main difference between the three is how your money is managed and the minimum investment threshold. A SIF pools investors’ money like a mutual fund but can use more flexible strategies, including long-short and tactical strategies, with a minimum investment of ₹10 lakh. A PMS manages a separate portfolio for each investor and requires at least ₹50 lakh. Category III AIFs are privately pooled funds that can also use long-short and derivative strategies, but generally require a minimum investment of ₹1 crore.

4. What strategies can a SIF run?

SIF funds in India can offer equity, debt and hybrid investment strategies permitted under SEBI’s framework. Depending on the strategy, they can also take long and short exposure through derivatives within prescribed limits. The exact investment approach, asset allocation and derivative exposure depend on the particular SIF strategy.

5. How is a SIF taxed?

SIF taxation rules depend on the type of strategy the SIF uses. For instance:

• Equity-oriented SIFs: If at least 65% is invested in domestic listed equities, gains within 12 months are taxed at 20%. After 12 months, gains above ₹1.25 lakh per financial year are taxed at 12.5%, without indexation.

• Debt-oriented SIFs: If more than 65% is invested in debt and money market instruments, SIF will qualify as 'Specified Mutual Fund' and therefore, gains are taxed at your applicable income-tax slab rate, irrespective of how long you stay invested. Further, in case exposure to debt and money market instruments is not more than 65% and less than 65% in domestic listed equities; gains within 24 months are taxed at applicable slab rates. After 24 months, gains are taxed at 12.5% without any exemption and indexation benefits.

• Hybrid SIFs: Tax treatment depends on the actual equity allocation, not simply the scheme’s “hybrid” label. For example, a SIF with 70% listed domestic equity exposure may qualify for equity taxation, while one with 60% listed domestic equity exposure would not.

Lastly, it is to be noted that a period of holding of 12 months is applicable in case of listed securities even if such security is a debt oriented. 

6. Who is eligible to invest in a SIF?

Investors who meet the ₹10 lakh minimum investment threshold can invest in a SIF, subject to the terms of the particular strategy. Accredited investors are exempt from this minimum threshold. Because SIFs can follow more complex strategies than conventional mutual funds, investors should understand the strategy and its risks before investing.

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• Investments in Specialized Investment Fund involve relatively higher risk, including potential loss of capital, liquidity risk, and market volatility. Please read all investment strategy related documents carefully before making the investment decision.