Specialised Investment Funds (SIFs): Designed for All Market Cycles

In today’s dynamic market, investors seek returns that remain stable across all market phases — bullish, bearish, or sideways. That’s where Specialised Investment Funds (SIFs) come in.
Launched after SEBI’s approval in April 2024, these funds bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS) — offering professional-level strategies with moderate ticket size.

What Are Specialised Investment Funds (SIFs)?

SIFs are innovative mutual fund-like schemes that use advanced investment strategiessuch as:

• Long–short equity positions
• Derivative-based hedging
• Tactical sector rotation
• Multi-asset diversification

Their primary goal is to deliver “arbitrage-plus” returns — typically 6–8% per annum, i.e., 100–200 basis points higher than traditional fixed income or arbitrage funds.

Why Were SIFs Introduced?

The SEBI nod to SIFs in 2024 allowed fund houses to experiment with structured, risk-managed products.
They fill the performance gap between:

• Conventional Mutual Funds (long-only, directional bets) and
• PMS / AIFs (high-ticket, customised strategies)

With a minimum investment of ₹10 lakh, SIFs offer access to professional-grade portfolio techniques for serious investors — without the ₹50 lakh minimum typically required for PMS.

How Do SIFs Work?

Unlike mutual funds that simply buy and hold stocks, SIFs can:

• Go long on stocks expected to rise
• Go short on stocks or sectors expected to fall
• Use derivatives to hedge portfolio risk
• Adjust allocations dynamically between sectors or asset classes

Example:
A SIF may take a long position in the IT sector and a short position in metals if it expects technology to outperform cyclicals — thereby reducing market risk while aiming for steady returns. Return Expectations

Most SIFs target 6–8% annualised returns, slightly higher than:

• Arbitrage funds (~5–6%)
• Debt funds (~6–7%)

This is achieved through tactical trading and controlled risk exposure. Where Do SIFs Fit in Your Portfolio?

Experts suggest allocating 10–20% of your portfolio to SIFs as a satellite component — complementing core holdings in diversified equity or hybrid funds. “For investors who value stability, liquidity, and predictability, SIFs act as tactical allocation—complementing core equity and debt funds,” says Nirav Karkera, Head of Research, Fisdom.

Points to Watch

While SIFs offer flexibility, investors should note:

• Some may have lock-in or limited liquidity
• Returns are market-linked — not guaranteed
• Understanding target outcomes and risks is essential

“The definition of outcome and target return should be clearly understood,” notes Jyoti Prakash Gadia, MD, Resurgent India.