SEBI Introduces Specialized Investment Funds: What Investors Need to Know

The investing game in India is evolving with the introduction of a new player – Specialized Investment Funds (SIFs). While mutual funds have been a reliable choice for investors, they often lacked personalization. On the other hand, Portfolio Management Services (PMS) provided personalized options but came with a high minimum investment requirement.

SEBI has introduced SIFs to bridge this gap between mutual funds and PMS, offering investors more flexibility and customization. This new investment option is designed for investors who are well-informed about the markets and are willing to take on higher risks for potentially higher returns. The minimum investment required for SIFs is Rs 10 lakh, and fund managers have more flexibility in their investment strategies compared to mutual funds.

SIFs cover a wide range of investment strategies, from equity to debt and everything in between. While fund managers have more freedom in their decisions, there are also restrictions in place to ensure a balanced approach. For instance, exposure to a single issuer is capped at 20% for debt instruments, with a provision to increase it to 25% with approval. Similarly, SIFs have limits on investing in equity shares and REITs/InvITs to maintain diversification while allowing for targeted exposure.

The need for SIFs arises from the gap between mutual funds and PMS. Mutual funds are accessible to a broad range of investors with low minimum investments, but they offer less customization in investment strategies. PMS, on the other hand, provides tailored strategies but comes with a high investment threshold, catering mostly to high-net-worth individuals.

By introducing SIFs, SEBI aims to provide a middle ground for investors who seek personalized investment options with more flexibility than mutual funds but without the high minimum investment requirement of PMS. This new investment option is set to bring more choices and opportunities for Indian investors in the ever-evolving market landscape.