Introduction to SEBI’s New SIF Asset Class
The Indian investment landscape is undergoing a rapid transformation. Market regulator SEBI has approved a new asset class called Specialised Investment Funds (SIFs). For years, investors in India had access to mutual funds, PMS, and AIFs. In December 2024, SEBI sought to offer something sharper, a product that sits between traditional retail offerings and big-ticket institutional platforms.
SIFs are designed to provide investors with exposure to advanced investment strategies under a regulated and transparent framework. They come with a minimum investment requirement, clearly defined rules, and a framework that strikes a balance between accessibility and protection.
What Qualifies as a Specialized Investment Fund?
A Specialised Investment Fund is essentially a new category of mutual fund, a pooled investment vehicle with SEBI’s stamp of approval. The SIF was introduced to bridge the gap between mutual funds and PMS in terms of portfolio flexibility. Unlike predefined strategies followed by traditional mutual funds, SIFs are allowed to follow flexible, sophisticated strategies such as long-short, sector rotation, hybrid, etc. Investors are required to invest at least ₹10 lakh across all SIF strategies.
The “specialised” part is key. These funds focus on advanced themes or non-traditional assets that demand expertise and careful oversight.
However, SEBI has since introduced specific guidelines for investors to follow. Accordingly, investors cannot invest more than 20% (AAA-rated), 16% (AA-rated), or 12% (A-rated and below) in a single company’s debt securities. They are also forbidden from investing more than 25% of net asset value (NAV) in any single sector.
Regulatory Timeline & Launch Date
SEBI announced the SIF framework in December 2024, with operational guidelines published in early 2025. The rollout means fund houses, asset managers, and institutional players can now start structuring offerings.
Why SEBI Created Specialized Investment Funds
The birth of SIFs isn’t random. It’s SEBI’s response to how global capital markets are evolving and how Indian investors themselves are maturing.
Bridging the Gap Between Retail and Institutional Investing
Retail investors often find themselves locked out of strategies that institutional players enjoy, like infrastructure funds or global private equity. SIFs bridge that gap. They allow individuals with the appetite and means to access the same quality of strategies that were earlier reserved for endowments or sovereign wealth funds.
Attracting Global Capital Inflows
Global investors want regulated structures in India that resemble international models. With SIFs, SEBI signals that India is ready to play by global standards, encouraging foreign capital to flow into domestic markets, infrastructure, and alternative assets.
Enhancing Portfolio Diversification
By design, SIFs allow allocations beyond equity and debt. For investors seeking a hedge against volatility or looking to tap into long-cycle growth sectors like infrastructure and commodities, SIFs open new doors.
Minimum Investment Requirement & Eligibility
Every new asset class comes with entry conditions, and SEBI has set clear boundaries here.
Specified Entry Threshold
To ensure only serious participants enter, SEBI has pegged a minimum investment size (industry sources peg it around ₹10 lakh–₹25 lakh, depending on fund type). This threshold keeps casual investors away while still widening the base beyond ultra-rich categories.
Who Can Participate: Retail vs HNI vs Institutional
- Retail investors: Allowed, but only if they can meet the threshold.
- HNIs: Naturally a strong fit, given ticket sizes.
- Institutions: Pension funds, insurers, and family offices are expected to be early adopters.
Lock-in Period & Redemption Rules
Unlike liquid mutual funds, SIFs come with lock-in clauses. Investors must commit their money for a fixed horizon, often 3–5 years, before redemption is allowed. This lock-in ensures strategies have breathing room to perform.
Allowed Asset Strategies & Investment Focus
SIFs aren’t meant to mimic mutual funds. They target spaces that need more flexibility and expertise.
Alternative Assets: RE, PE, Infra, Commodities, etc.
Expect SIFs to channel capital into real estate, private equity, infrastructure, and commodities. These are areas where long-term investors can capture higher alpha but also face unique risks.
Multi-Strategy Funds vs Single-Focus Funds
Some SIFs will be single-theme, say, an infra-only fund. Others will take a multi-strategy approach, blending PE, debt, and commodities to smooth returns. This flexibility makes the SIF label more dynamic than traditional AIF categories.
Risk-Return Profile of SIFs
Because they invest in non-traditional assets, SIFs carry higher return potential, but they also carry liquidity and execution risks. They aren’t a replacement for core equity/debt holdings, but rather a satellite allocation to boost diversification.
SEBI Regulations & Compliance for SIFs
With new freedoms come new checks. SEBI has designed a compliance framework that keeps investor interest front and center.
Fund Structure: AIF Category, NAV Reporting, Valuation
SIFs bridge the category gap between mutual funds and high-ticket options like PMS and AIFs. But fund houses that offer SIFs are required to declare NAVs periodically, disclose methodologies for valuation, and maintain independent custodianship.
Risk Management & Disclosure Norms
From stress testing portfolios to maintaining clear risk disclosures, SEBI has tightened the screws. Investors get to see where their money goes, how risks are managed, and what scenarios could impact returns.
Fee Structures and Performance Incentives
Like global hedge funds, SIFs may run management plus performance fees. For example, a flat 2% management fee plus a 10–15% performance incentive above a hurdle rate. SEBI has capped structures to prevent excessive charging.
Benefits for Investors & Asset Managers
Why should investors and managers care? Because SIFs expand the canvas.
Access to Sophisticated Strategies
Retail and HNIs can now access strategies once reserved for institutions, like infra debt or global PE exposure. This is portfolio sophistication made available onshore.
Institutional-Grade Due Diligence & Governance
Unlike informal investment clubs or unregulated products, SIFs come with SEBI-mandated due diligence. That means managers are accountable, audits are mandatory, and governance standards match institutional benchmarks.
Operational Transparency & Regulatory Backing
Investors know how funds are deployed, how returns are calculated, and how redemptions are handled. Transparency builds trust, and regulatory oversight ensures credibility.
Risks & Limitations to Consider
No new asset class comes risk-free. SEBI itself has flagged key limitations.
Liquidity Constraints & Lock-in
Because SIFs invest in assets like infra or PE, liquidity is limited. Investors can’t pull out money at will; patience is part of the deal.
Higher Entry Barriers & Costs
Ticket sizes, fee structures, and compliance costs make SIFs less accessible than mutual funds. Only investors with surplus capital should consider them.
Strategy Concentration Risk
Single-theme SIFs could expose investors to concentrated risks. For example, an infra-heavy fund may falter if policy bottlenecks delay projects.
Comparison Table: SIFs vs Other AIF Categories
| Feature | SIFs (Specialised Investment Funds) | AIF Cat I | AIF Cat II | AIF Cat III | Mutual Funds |
| Minimum Investment | ₹10 lakh (PAN-level) | ₹1 crore | ₹1 crore | ₹1 crore | ₹500–₹1,000 (varies) |
| Lock-in / Liquidity | 3–5 yrs typical; redemption with notice | Scheme-specific | Scheme-specific | Scheme-specific; less liquid | Daily liquidity |
| Investor Base | Retail, HNIs, Institutions (above threshold) | HNIs, Institutions | HNIs, Institutions | HNIs, Institutions | General retail |
| Asset Focus | Alternatives: PE, RE, Infra, Commodities, Hybrid | Startups, SMEs, Infra, Social Venture | PE, Real Estate, Debt | Hedge, long-short, complex strategies | Equity, Debt, Hybrid |
Source: HDFC, Economic Times, Zerodha
How to Allocate SIFs in an Investment Portfolio
For Retail Investors vs HNI/Institutional Portfolios
For retail investors who qualify, SIFs can comprise 5–10% of portfolios as a diversification strategy. For HNIs and institutions, allocations could be higher, serving as satellite holdings around core equity/debt strategies.
Blending SIFs with Other Assets (Equity, Debt, ETFs)
Think of SIFs as spice, not the main dish. They work best when blended with equities, bonds, or ETFs. A balanced mix prevents concentration risk while still giving exposure to unique growth themes.
What Asset Managers Should Know Before Launching SIFs
Fund managers need to prepare for high regulatory scrutiny, complex valuation models, and investor education campaigns. SIFs will succeed only if managers build trust through governance and deliver real diversification benefits.
Conclusion
The launch of Specialised Investment Funds marks another milestone in India’s financial market evolution. By creating a new asset class that blends institutional sophistication with broader accessibility, SEBI is setting the stage for deeper, more diversified capital flows.
SIFs aren’t for everyone. They come with higher entry thresholds, liquidity locks, and risk profiles that demand informed participation. But for investors who qualify, and for asset managers ready to operate at global standards, SIFs could reshape the way India thinks about alternative assets.
FAQs:
Q. What is the minimum investment required for a SEBI-registered SIF?
The minimum ticket size for investing in SIFs is ₹10 lakh, across all SIF strategies.
Q. Can retail investors participate in SIFs?
Yes, retail investors can step in, but only those who can meet the minimum threshold. In effect, SIFs open a door for upper-middle-class investors and affluent professionals who were earlier locked out of AIFs because of steep entry limits.
Q. How is a SIF different from other AIF categories?
Traditional AIF categories serve narrower purposes: Category I supports startups and SMEs, Category II focuses on debt and PE, and Category III runs hedge-style strategies. SIFs, however, bring flexibility. They can straddle multiple themes, offer broader access, and allow regulated participation for a wider investor base with smaller ticket sizes.
Q. What asset classes can SIFs invest in?
SIFs have a wide playing field. They can tap into real estate, private equity, infrastructure, and even multi-strategy mixes. The idea is to provide exposure to non-traditional assets that go beyond regular equity and debt.
Q. Are there lock-in periods or redemption limits in SIFs?
Yes. SIFs are designed as medium-to-long-term products. Investors should expect a lock-in of around 3–5 years, depending on the fund. Redemptions are usually limited during this period, giving managers the stability to execute longer-cycle strategies like infra or private equity.
Q. How does regulatory oversight differ in SIFs vs regular mutual funds?
Mutual funds are tightly regulated retail products with daily NAVs, instant liquidity, and SEBI’s strict retail framework. SIFs operate under the AIF umbrella, which means periodic NAV reporting, detailed risk disclosures, and flexible but transparent structures. Oversight is still rigorous, but the design gives managers room to run complex strategies.
