SEBI’s New Regulatory Framework for Specialized Investment Funds (SIFs)

SEBI’s New Regulatory Framework for Specialized Investment Funds (SIFs). The Securities and Exchange Board of India (SEBI) has introduced a new regulatory framework for a new category of investment products known as Specialized Investment Funds (SIFs). This framework, effective from April 1, 2025, is designed to bridge the gap between traditional Mutual Funds (MFs) and Portfolio Management Services (PMS). Through this move, SEBI aims to offer greater investment flexibility to sophisticated investors while maintaining necessary regulatory oversight. In this article, we’ll explore the new regulatory framework for SIFs in a detailed manner.
What are Specialized Investment Funds (SIFs)?
Specialized Investment Funds (SIFs) are a new class of investment vehicles proposed by SEBI to offer a more flexible structure for investors compared to mutual funds. These funds are primarily targeted at high-net-worth and sophisticated investors who seek diverse and complex investment strategies but still want regulatory protection.
SIFs are positioned between the traditional mutual fund schemes and PMS offerings. While mutual funds are heavily regulated with uniform investment strategies, and PMS offer higher flexibility but limited regulatory oversight, SIFs aim to strike a balance by offering strategic freedom with adequate safeguards.
Objectives of the New Regulatory Framework for SIFs
The new regulatory framework for SIFs introduced by SEBI is aimed at:
• Bridging the regulatory and strategic flexibility gap between MFs and PMS.
• Enabling Asset Management Companies (AMCs) to offer long-short strategies, equity and debt sectoral strategies, and hybrid investment options.
• Providing investors with structured and transparent investment vehicles.
• Ensuring better risk management and clear disclosures.
Eligibility Criteria for Setting Up SIFs
SEBI has proposed two distinct eligibility routes for AMCs to launch Specialized Investment Funds:
Route 1: Track Record and Asset Size
• The mutual fund's sponsor should have a track record of at least three years.
• The average assets under management (AUM) of the AMC must be Rs.10,000 crore or more during the last three years.
• No regulatory action should have been taken by SEBI against the sponsor or AMC in the last three years.
Route 2: Qualified Investment Team
• The AMC should appoint a Chief Investment Officer (CIO) with a minimum of 10 years of experience managing at least Rs.5,000 crore.
• The fund manager must have a minimum of 3 years of experience managing at least Rs.500 crore.
• Similar to Route 1, there should be no history of regulatory action by SEBI against the sponsor or AMC in the last three years.
These two routes ensure that only experienced players with a clean regulatory record are allowed to manage SIFs.
Minimum Investment Requirements
One of the key distinctions of the new regulatory framework for SIFs is the minimum investment requirement. Each investor must invest at least Rs.10 lakh, and this amount must be maintained on a PAN-wise basis across all strategies under a specific SIF.
This requirement, however, does not apply to accredited investors who qualify for exemptions based on their income and investment experience.
Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs), and Systematic Transfer Plans (STPs) are permitted under SIFs, provided the minimum investment threshold of Rs.10 lakh is respected.
Types of Investment Strategies Allowed
SIFs offer a broad range of investment strategies across equity, debt, and hybrid categories. These include:
Equity-Oriented Strategies
1. Equity Long-Short Fund

At least 80% of assets must be in equity and equity-related instruments.

Maximum 25% of assets can be in unhedged derivative positions.

2. Equity Ex-Top 100 Long-Short Fund

At least 65% of assets must be in stocks beyond the top 100 by market capitalization.

Maximum 25% short exposure via unhedged derivatives.

3. Sector Rotation Long-Short Fund

Minimum 80% investment across a maximum of four chosen sectors.

Maximum 25% short exposure via derivatives.

Debt-Oriented Strategies
1. Debt Long-Short Fund
2. Sectoral Debt Long-Short Fund
Under these strategies:
• Up to 20% of NAV can be in AAA-rated debt.
• 16% in AA-rated, and 12% in A-rated or lower.
• A cap of 25% of NAV is placed on exposure to a specific sector's debt and money market securities.
Hybrid Strategies
1. Hybrid Long-Short Fund
2. Sectoral Hybrid Long-Short Fund
These strategies combine features of both equity and debt instruments to provide balanced growth and risk mitigation.
Cap on Number of Strategies Per AMC
To avoid the excessive proliferation of investment schemes, SEBI has capped each AMC to offering only one strategy per category. This ensures focused fund management and avoids confusion for investors.
Subscription, Redemption, and Listing
SIFs offer flexible fund structures and can be launched as:
• Open-ended funds
• Close-ended funds
• Interval funds
There is no uniform rule on how frequently investments can be subscribed or redeemed. These will depend on the nature of the investment strategy.
However, the redemption notice period can go up to 15 working days. In the case of closed-ended and interval funds, listing on stock exchanges is mandatory.
Benchmarking of Specialized Investment Funds (SIFs)
SEBI mandates a single-tier benchmark structure for SIFs. The investment strategies will be benchmarked against a broad market index that best represents the fund’s portfolio.
• Equity strategies may be benchmarked to indices like BSE Sensex, NSE Nifty, BSE 100, or CRISIL 500.
• Debt strategies should be benchmarked to a broad debt market index relevant to the portfolio.
• Hybrid strategies must select a benchmark that reflects their mixed investment nature.
This requirement promotes transparency and allows investors to compare fund performance effectively.
Branding and Marketing Guidelines
To ensure that SIFs are not confused with traditional mutual funds, SEBI has laid down clear branding and marketing norms:
• SIFs must be branded separately from existing mutual fund schemes.
• The AMC may use its sponsor's brand name for up to five years, but only in conjunction with phrases such as “brought to you by” or “offered by.”
• SIFs must have a dedicated website or webpage.
• Promotional material must display the SIF’s brand name and logo more prominently than the mutual fund brand name.
These rules are aimed at building distinct brand identities for SIFs and ensuring clear communication with investors.
Risk Management and Derivatives
SIFs will follow a structured risk management framework where:
• Funds are assigned a Risk Band from 1 (low risk) to 5 (high risk).
• Reviews will be conducted monthly.
• Funds may invest up to 25% of their net assets in exchange-traded derivatives for non-hedging purposes.
• The total exposure (cash + derivatives) cannot exceed 100% of the net assets.
This regulation brings discipline in risk-taking activities and helps investors assess the risk profile more accurately.
Disclosure Norms
Transparency is key to investor confidence. Therefore, SEBI has mandated regular and detailed disclosures:
• Portfolio composition
• Liquidity risks
• Scenario analysis reports
• All disclosures to be made available on the SIF’s website
• Advertisements must include standard risk warnings
These guidelines ensure that investors have access to updated and relevant information at all times.
Distribution and Certification Requirements
The framework allows distributors who are already selling mutual funds to also distribute SIFs. However, they must clear the NISM Series-XIII: Common Derivatives Certification Examination before doing so.
AMFI and the respective AMC are responsible for ensuring that all agents and distributors comply with this new rule.
Implementation 
To ensure smooth implementation:
• AMFI has been directed to release necessary guidelines by March 31, 2025.
• Stock Exchanges and Clearing Corporations are expected to update their rules accordingly to accommodate SIFs.
This timeline ensures that all infrastructure and guidelines are in place before the official launch on April 1, 2025.
Conclusion
The SEBI releases regulatory framework for SIFs at an important time when investors are seeking more adapted and diversified investment avenues. Specialized Investment Funds (SIFs) promise to bring greater flexibility, innovation, and customization to India’s investment market. By combining features of mutual funds and portfolio management services, the new regulatory framework for SIFs offers the best of both worlds.
For advanced investors looking for dynamic strategies and professional fund management within a regulated structure, SIFs could be the most promising product category going forward. As the implementation date nears, it will be interesting to see how AMCs (Asset Management Companies) adapt to this new structure and how investors respond to this unique investment opportunity.
If you have any queries regarding this you can connect with Compliance Calendar experts through mail info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs
Q1. What are Specialized Investment Funds (SIFs)?
Ans. Specialized Investment Funds (SIFs) are a new category of investment products introduced by SEBI to bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS). They allow AMCs to offer flexible, long-short strategies across equity, debt, and hybrid assets while maintaining regulatory oversight and transparency.
Q2. Who is eligible to set up a SIF under SEBI's new regulatory framework?
Ans. To set up a SIF, an AMC must meet one of two criteria:
• Have at least 3 years of operation and an average AUM of Rs.10,000 crore in the last three years with no SEBI regulatory action.
• Appoint a CIO with 10 years of experience managing Rs.5,000 crore and a fund manager with at least 3 years managing Rs.500 crore, with no regulatory action in the last three years.
Q3. What is the minimum investment required in a SIF?
Ans. The minimum investment required in a SIF is Rs.10 lakh per investor, maintained on a PAN-wise basis across all strategies. This does not apply to accredited investors. SIPs, SWPs, and STPs are allowed if this threshold is maintained.
Q4. What types of investment strategies are allowed under SIFs?
Ans. SIFs can offer a variety of strategies, including:
• Equity-oriented: Long-short, sector rotation, and ex-top 100 strategies.
• Debt-oriented: Debt long-short and sectoral debt strategies.
• Hybrid strategies: Combining equity and debt in long-short formats.
Q5. Can a single AMC offer multiple SIF strategies?
Ans. No. SEBI has capped each AMC to offer only one investment strategy per category under SIFs. This is to prevent over-proliferation of schemes and to ensure focused fund management.
Q6. What are the redemption rules under the new regulatory framework for SIFs?
Ans. SIFs may be open-ended, close-ended, or interval-based. Subscription and redemption intervals can be structured based on the nature of the investment strategy. However, redemption notice periods can go up to 15 working days. Closed-ended and interval funds must be listed on stock exchanges.
Q7. How are SIFs different in branding and promotion compared to mutual funds?
Ans. SIFs must be marketed under a separate brand name and logo from the mutual fund schemes of the AMC. While the sponsor’s brand name can be used for up to five years, it must be used with phrases like “offered by.” The SIF brand name must be more prominently displayed in all promotional materials.
Q8. What disclosures are SIFs required to make?
Ans. SIFs must provide regular disclosures on:
• Portfolio details
• Liquidity risk
• Scenario analysis
These must be published on the SIF’s dedicated website or webpage. All advertisements must also carry a standard risk warning as mandated by SEBI.

The Securities and Exchange Board of India (SEBI) has introduced a new regulatory framework for a new category of investment products known as Specialized Investment Funds (SIFs). This framework, effective from April 1, 2025, is designed to bridge the gap between traditional Mutual Funds (MFs) and Portfolio Management Services (PMS). Through this move, SEBI aims to offer greater investment flexibility to sophisticated investors while maintaining necessary regulatory oversight. In this article, we’ll explore the new regulatory framework for SIFs in a detailed manner.

What are Specialized Investment Funds (SIFs)?

Specialized Investment Funds (SIFs) are a new class of investment vehicles proposed by SEBI to offer a more flexible structure for investors compared to mutual funds. These funds are primarily targeted at high-net-worth and sophisticated investors who seek diverse and complex investment strategies but still want regulatory protection.

SIFs are positioned between the traditional mutual fund schemes and PMS offerings. While mutual funds are heavily regulated with uniform investment strategies, and PMS offer higher flexibility but limited regulatory oversight, SIFs aim to strike a balance by offering strategic freedom with adequate safeguards.

Objectives of the New Regulatory Framework for SIFs

The new regulatory framework for SIFs introduced by SEBI is aimed at:

• Bridging the regulatory and strategic flexibility gap between MFs and PMS.

• Enabling Asset Management Companies (AMCs) to offer long-short strategies, equity and debt sectoral strategies, and hybrid investment options.

• Providing investors with structured and transparent investment vehicles.

• Ensuring better risk management and clear disclosures.

Eligibility Criteria for Setting Up SIFs

SEBI has proposed two distinct eligibility routes for AMCs to launch Specialized Investment Funds:

Route 1: Track Record and Asset Size

• The mutual fund's sponsor should have a track record of at least three years.

• The average assets under management (AUM) of the AMC must be Rs.10,000 crore or more during the last three years.

• No regulatory action should have been taken by SEBI against the sponsor or AMC in the last three years.

Route 2: Qualified Investment Team

• The AMC should appoint a Chief Investment Officer (CIO) with a minimum of 10 years of experience managing at least Rs.5,000 crore.

• The fund manager must have a minimum of 3 years of experience managing at least Rs.500 crore.

• Similar to Route 1, there should be no history of regulatory action by SEBI against the sponsor or AMC in the last three years.

These two routes ensure that only experienced players with a clean regulatory record are allowed to manage SIFs.

Minimum Investment Requirements

One of the key distinctions of the new regulatory framework for SIFs is the minimum investment requirement. Each investor must invest at least Rs.10 lakh, and this amount must be maintained on a PAN-wise basis across all strategies under a specific SIF.

This requirement, however, does not apply to accredited investors who qualify for exemptions based on their income and investment experience.

Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs), and Systematic Transfer Plans (STPs) are permitted under SIFs, provided the minimum investment threshold of Rs.10 lakh is respected.

Types of Investment Strategies Allowed

SIFs offer a broad range of investment strategies across equity, debt, and hybrid categories. These include:

Equity-Oriented Strategies

1. Equity Long-Short Fund

At least 80% of assets must be in equity and equity-related instruments.
Maximum 25% of assets can be in unhedged derivative positions.

2. Equity Ex-Top 100 Long-Short Fund

At least 65% of assets must be in stocks beyond the top 100 by market capitalization.
Maximum 25% short exposure via unhedged derivatives.

3. Sector Rotation Long-Short Fund

Minimum 80% investment across a maximum of four chosen sectors.
Maximum 25% short exposure via derivatives.

Debt-Oriented Strategies

1. Debt Long-Short Fund

2. Sectoral Debt Long-Short Fund

Under these strategies:

• Up to 20% of NAV can be in AAA-rated debt.

• 16% in AA-rated, and 12% in A-rated or lower.

• A cap of 25% of NAV is placed on exposure to a specific sector's debt and money market securities.

Hybrid Strategies

1. Hybrid Long-Short Fund

2. Sectoral Hybrid Long-Short Fund

These strategies combine features of both equity and debt instruments to provide balanced growth and risk mitigation.

Cap on Number of Strategies Per AMC

To avoid the excessive proliferation of investment schemes, SEBI has capped each AMC to offering only one strategy per category. This ensures focused fund management and avoids confusion for investors.

Subscription, Redemption, and Listing

SIFs offer flexible fund structures and can be launched as:

• Open-ended funds

• Close-ended funds

• Interval funds

There is no uniform rule on how frequently investments can be subscribed or redeemed. These will depend on the nature of the investment strategy.

However, the redemption notice period can go up to 15 working days. In the case of closed-ended and interval funds, listing on stock exchanges is mandatory.

Benchmarking of Specialized Investment Funds (SIFs)

SEBI mandates a single-tier benchmark structure for SIFs. The investment strategies will be benchmarked against a broad market index that best represents the fund’s portfolio.

• Equity strategies may be benchmarked to indices like BSE Sensex, NSE Nifty, BSE 100, or CRISIL 500.

• Debt strategies should be benchmarked to a broad debt market index relevant to the portfolio.

• Hybrid strategies must select a benchmark that reflects their mixed investment nature.

This requirement promotes transparency and allows investors to compare fund performance effectively.

Branding and Marketing Guidelines

To ensure that SIFs are not confused with traditional mutual funds, SEBI has laid down clear branding and marketing norms:

• SIFs must be branded separately from existing mutual fund schemes.

• The AMC may use its sponsor's brand name for up to five years, but only in conjunction with phrases such as “brought to you by” or “offered by.”

• SIFs must have a dedicated website or webpage.

• Promotional material must display the SIF’s brand name and logo more prominently than the mutual fund brand name.

These rules are aimed at building distinct brand identities for SIFs and ensuring clear communication with investors.

Risk Management and Derivatives

SIFs will follow a structured risk management framework where:

• Funds are assigned a Risk Band from 1 (low risk) to 5 (high risk).

• Reviews will be conducted monthly.

• Funds may invest up to 25% of their net assets in exchange-traded derivatives for non-hedging purposes.

• The total exposure (cash + derivatives) cannot exceed 100% of the net assets.

This regulation brings discipline in risk-taking activities and helps investors assess the risk profile more accurately.

Disclosure Norms

Transparency is key to investor confidence. Therefore, SEBI has mandated regular and detailed disclosures:

• Portfolio composition

• Liquidity risks

• Scenario analysis reports

• All disclosures to be made available on the SIF’s website

• Advertisements must include standard risk warnings

These guidelines ensure that investors have access to updated and relevant information at all times.

Distribution and Certification Requirements

The framework allows distributors who are already selling mutual funds to also distribute SIFs. However, they must clear the NISM Series-XIII: Common Derivatives Certification Examination before doing so.

AMFI and the respective AMC are responsible for ensuring that all agents and distributors comply with this new rule.

Implementation

To ensure smooth implementation:

• AMFI has been directed to release necessary guidelines by March 31, 2025.

• Stock Exchanges and Clearing Corporations are expected to update their rules accordingly to accommodate SIFs.

This timeline ensures that all infrastructure and guidelines are in place before the official launch on April 1, 2025.

Conclusion

The SEBI releases regulatory framework for SIFs at an important time when investors are seeking more adapted and diversified investment avenues. Specialized Investment Funds (SIFs) promise to bring greater flexibility, innovation, and customization to India’s investment market. By combining features of mutual funds and portfolio management services, the new regulatory framework for SIFs offers the best of both worlds.

For advanced investors looking for dynamic strategies and professional fund management within a regulated structure, SIFs could be the most promising product category going forward. As the implementation date nears, it will be interesting to see how AMCs (Asset Management Companies) adapt to this new structure and how investors respond to this unique investment opportunity.

If you have any queries regarding this you can connect with Compliance Calendar experts through mail info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs

Q1. What are Specialized Investment Funds (SIFs)?

Ans. Specialized Investment Funds (SIFs) are a new category of investment products introduced by SEBI to bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS). They allow AMCs to offer flexible, long-short strategies across equity, debt, and hybrid assets while maintaining regulatory oversight and transparency.

Q2. Who is eligible to set up a SIF under SEBI's new regulatory framework?

Ans. To set up a SIF, an AMC must meet one of two criteria:

• Have at least 3 years of operation and an average AUM of Rs.10,000 crore in the last three years with no SEBI regulatory action.

• Appoint a CIO with 10 years of experience managing Rs.5,000 crore and a fund manager with at least 3 years managing Rs.500 crore, with no regulatory action in the last three years.

Q3. What is the minimum investment required in a SIF?

Ans. The minimum investment required in a SIF is Rs.10 lakh per investor, maintained on a PAN-wise basis across all strategies. This does not apply to accredited investors. SIPs, SWPs, and STPs are allowed if this threshold is maintained.

Q4. What types of investment strategies are allowed under SIFs?

Ans. SIFs can offer a variety of strategies, including:

• Equity-oriented: Long-short, sector rotation, and ex-top 100 strategies.

• Debt-oriented: Debt long-short and sectoral debt strategies.

• Hybrid strategies: Combining equity and debt in long-short formats.

Q5. Can a single AMC offer multiple SIF strategies?

Ans. No. SEBI has capped each AMC to offer only one investment strategy per category under SIFs. This is to prevent over-proliferation of schemes and to ensure focused fund management.

Q6. What are the redemption rules under the new regulatory framework for SIFs?

Ans. SIFs may be open-ended, close-ended, or interval-based. Subscription and redemption intervals can be structured based on the nature of the investment strategy. However, redemption notice periods can go up to 15 working days. Closed-ended and interval funds must be listed on stock exchanges.

Q7. How are SIFs different in branding and promotion compared to mutual funds?

Ans. SIFs must be marketed under a separate brand name and logo from the mutual fund schemes of the AMC. While the sponsor’s brand name can be used for up to five years, it must be used with phrases like “offered by.” The SIF brand name must be more prominently displayed in all promotional materials.

Q8. What disclosures are SIFs required to make?

Ans. SIFs must provide regular disclosures on:

• Portfolio details

• Liquidity risk

• Scenario analysis

These must be published on the SIF’s dedicated website or webpage. All advertisements must also carry a standard risk warning as mandated by SEBI.