Asset management companies are evaluating opportunities in Specialised Investment Funds (SIFs) that allow an integrated and well-governed investment option to high networth investors who are interested in both traditional equity and debt as well as derivative instruments.
Sebi has come out with a circular providing a regulatory framework for SIFs, following which the funds have gone to the drawing board to work out the details.
HDFC AMC at its fourth quarter earnings call has informed analysts that a team is currently working on creating the “right set of products” that can leverage the firm’s investment and risk management capabilities while also addressing evolving investor needs.
“The purpose of introducing SIF was to offer investors, who are leaning towards unregulated or unregistered products, a regulated alternative to mutual funds that are very well governed. With the regulatory framework now in place, we are actively evaluating potential opportunities in this space,” said Navneet Munot, managing director and CEO, HDFC AMC.
Specialised investment funds, when introduced, will occupy an intermediary position between traditional mutual funds (MFs) and portfolio management services (PMS). Unlike MFs, with their strictly defined investment mandate and broader retail focus, or PMS, with its high minimum profiles and bespoke mandates, SIFs are expected to have a more diversified investment strategy with asset allocation across equities, fixed income and exchange‑traded or over‑the‑counter derivatives.
The Sebi circular has set a minimum investment threshold of ₹10 lakh per investor at the PAN level, which makes these products more suitable for high net worth individuals and family office segments who are increasingly seeking non‑linear return streams.
According to the Sebi circular, SIFs can offer three categories of investment strategies: the first is equity-oriented strategies such as equity long-short funds and sector rotation funds. The second is debt-oriented strategies such as debt long-short funds and sectoral debt funds. The third category is hybrid strategies, including active asset allocator funds and hybrid long-short funds.
The current framework allows an AMC to launch only one investment strategy per category per SIF.
Sebi has outlined two routes through which an eligible AMC can establish an SIF. The first is if the AMC has been operational for at least three years, it must have an average assets under management (AUM) of ₹10,000 crore or more over the last three years. The alternative route is that the AMC must appoint a chief investment officer with at least 10 years of experience managing an AUM of ₹5,000 crore or more. The framework also notes that an additional fund manager must have at least three years of experience managing an AUM of ₹500 crore
Market observers are bullish on SIFs gaining traction when launched. This is primarily due to a couple of factors. First, the ability to incorporate derivatives allows for tailored risk‑management solutions that resonate with HNIs and institutional investors looking to build sophisticated portfolios. With Sebi prescribing a clear framework covering areas of governance, valuation and disclosure, there is lower execution risk and reputational uncertainties.
“We anticipate strong early‑stage demand — particularly from family offices and institutions seeking bespoke risk‑adjusted returns without the full commitment of a dedicated PMS and global asset allocators looking to deploy themes such as volatility strategies, yield enhancement in a regulated Indian onshore wrapper,” said Anindya Paulchaudhuri, group CEO of wealth management firm Wealthapp.
“Over a 3–5‑year horizon, as track records mature and distribution widens, specialised investment funds are likely to capture a meaningful share of incremental HNI allocations — growing to 5–7 per cent of total alternative AUM in India. Continuous innovation in strategy and fee design will underpin their appeal,” he said.
There are also some concerns. As a nascent product category, historical performance data will be sparse. Hybrid portfolios require sophisticated risk‑management infrastructure. Smaller asset managers may face steep implementation costs to meet Sebi’s reporting standards.