Specialized investment funds (SIFs) are emerging as a new category in India’s mutual fund landscape, positioned as a next-generation solution for investors seeking better returns, who want a flavour and exposure of different investors strategies within the equity markets.
SIFs act as a bridge between mutual funds and high-ticket investment vehicles such as portfolio management services (PMS) and alternative investment funds (AIFs) which demand minimum commitments of Rs 50 lakh to Rs 1 crore. Similar avenues were previously inaccessible for the retailers due to high entry barriers and limited transparency space.
By lowering the minimum investment threshold and introducing a well-regulated, transparent structure, SIFs enable informed retail investors to explore diversified and high-potential strategies within a secure framework, said Swapnil Aggarwal, Director at VSRK Capital. “They could offer better risk-adjusted returns, while providing exposure to differentiated alpha-generating opportunities.”
Trivesh, COO at Tradejini, who recently launched SIFs at his platform, said that SIFs not only open access to complex, hedge fund–style strategies such as long-short equity, tactical asset allocation, and sector rotation, but also have an ability to generate alpha in uncertain markets, alike AIFs and PMS, thanks sophisticated active management.
By combining mutual funds’ accessibility and regulatory protections, SIFs fill this gap. Their strategy will be strategic and free of core holdings. Also, they may take upto 25% of their assets as exposure in derivatives, which will give them more freedom and flexibility in managing their funds. In simple terms, they will make complex investing accessible to the retail public without sacrificing on the crucial aspects of protection or transparency.
SIFs deploy a variety of strategies, such as quant-driven models, long-short equity and sector rotations, tactical asset allocation, diversified multi-asset approaches, and high frequency analytics, to enable faster and more efficient risk management. With the use of these tools, fund managers can quickly adjust positions, reduce risks, and seize opportunities.
“While tactical allocation can take advantage of changes in sectors or macrotrends to produce more consistent alpha, long-short and quantitative strategies continue to yield returns even in sideways or volatile markets,” said Trivesh D.
These approaches can help investors achieve portfolio resilience, smoother return profiles, and enhanced risk-adjusted performance, said Aggarwal. “By introducing such advanced strategies under a regulated retail-accessible framework, SIFs could elevate India’s investment landscape toward more sophisticated, outcome-oriented investing.”
On the other hand, to safeguard the interest of investors, market regulator SEBI has ensured that only asset management firms with more than three years of experience and at least Rs 10,000 crore in assets can launch SIFs, which adds credibility. Experts suggest that retailers with short investment horizons, lower risk appetite or aim for steady returns shall stay away from this avenue.
“With regulations similar to that of mutual funds, capped expense ratios of around 2.25 per cent , and no performance-linked fees, SIFs will give its investors flexibility along with the familiar protection and transparency,” said Tradejin’s Trivesh D.
Echoing the similar tone, Aggarwal from VSRK Capital said that these funds are best suited for financially literate investors with a higher risk appetite, longer investment horizons, and the ability to understand complex strategies and potential drawdowns, who have the capacity to withstand shorter-term uncertainty in favor of longer-term alpha.
SIFs have the potential to bring a significant change to India’s alternative investment ecosystem. Such transparency can deepen market liquidity, and attract a new category of serious investors, while encouraging innovation in fund management. But this new investment avenue may not dent mutual fund inflows, considering the rising investment culture in India.
“By catering to investors who have already optimized their portfolios to standard debt-equity allocations and are looking for next level-of diversification, SIFs will likely boost mutual fund or SIP inflows rather than deplete them,” Trivesh D added.
However, Aggarwal cautioned that there may be some diversion of flows from mutual funds or systematic investment plans (SIPs), the overall effect is expected to be expansionary — growing the total investment corpus rather than fragmenting it. “Over time, SIFs could complement mutual funds, creating a more layered, mature, and dynamic investment landscape that aligns with India’s evolving investor sophistication,” he added.
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