Specialized Investment Funds (SIFs):

SIFs represent a new type of investment instrument launched by SEBI within the existing Mutual Fund framework, designed to offer advanced strategies for sophisticated investors.

Core Strategy and Advantage

• SIFs primarily deploy Complex and Aggressive Strategies, focusing fundamentally on the Long Short Strategy.

• The Long Short Strategy allows fund managers to simultaneously take long positions (buying assets expected to rise) and short positions (selling assets expected to fall).

• A major advantage is Downside Protection, meaning the fund has the potential to generate profit even when markets are declining.

• This approach grants high flexibility compared to traditional Mutual Funds (MFs), which are typically "Long Only" and do not allow shorting.

• The success of the Long Short strategy is heavily dependent upon the skill of the fund manager.

Investment and Regulatory Structure

• SIFs mandate a high SEBI-required minimum initial investment of ₹10 lakh.

• After the initial investment, investors typically have access to standard MF features like SIP, STP, and SWP (Systematic Investment Plans/Transfers/Withdrawals).

• The funds operate with high regulatory oversight and transparency, similar to MFs. For example, equity SIFs require a mandatory daily redemption frequency.

• SIFs receive advantageous taxation, which is very similar to the taxation applied to Mutual Funds.

• Leverage (loan-based investing) is not allowed in SIFs, a constraint shared with Mutual Funds and Portfolio Management Services (PMS).

• SIFs feature expense ratios like MFs (capped at 2.25%) and are not allowed to charge performance fees or bonuses.