On December 17, Securities and Exchange Board of India (SEBI) unveiled new regulations and guardrails for the recently announced asset class, Specialised Investment Funds (SIFs), which was introduced in July to fill the gap between Portfolio Management Services (PMS) and Mutual Funds (MF).

Hailed by many as a bold, progressive step, this marks a leap in the evolution of India’s financial landscape. This new asset class will cater to investors who might have outgrown the risk-return profile of MFs but don’t yet have the significant funds required to opt for PMS.

For ambitious investors, mutual funds have been a more hands-off way to diversify their portfolio whereas PMS has catered to those with larger sums using personalised strategies. SIFs are designed to combine the best of both worlds and offer people an in-between investment alternative.

SIFs will accept investments from INR 10 lakh or more, a prerequisite that will ensure focus on accredited or experienced investors. With SIFs, SEBI’s goal is to offer flexibility and exclusivity for investors who are willing to take higher risks and have an eye for emerging opportunities.

SIFs will have the same expense structure as that of MFs including the maximum Total Expense Ratio (TER) set by SEBI. For debt instruments, the exposure to a single issuer is capped at 20% of the total assets, with flexibility of up to 25% with trustee approval. SIFs can be structured as open-ended, close-ended, or interval funds, allowing investors to maintain a more diversified portfolio. Fund managers overseeing SIFs must hold specific certifications from the National Institute of Securities Market, which is currently not a requirement for MFs.

• Offers a higher degree of flexibility compared to MFs.
• Allows for a wider range of investment strategies from equity to debt and more.
• Allows newer investors with a high risk appetite.
• Operates under SEBI’s strict framework, guidelines, and portfolio disclosure norms to ensure transparency and investor security.

While the potential returns on SIFs could be high-yielding, it is essential to note that this new asset class may not be for everyone. Given the higher risks, SIFs should be considered by those who have a keen understanding of market dynamics. 

The initial response to this announcement has been tremendously positive with many calling it a revolutionary step forward in the investment world. Regardless of how they fare, SEBI’s move is sure to open doors for more sophisticated investments, steering India’s financial terrain in a new direction.

ALSO READ:

Investing in your 20s and 30s: Smart Ways to Invest Money for Beginners

Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.