🔹 Key Features of SIFs
1. Eligibility Criteria for AMCs
AMCs must meet one of two routes to launch SIFs:
- Route 1 (Sound Track Record):
o 3+ years of operation.
o Average AUM of ₹10,000 crore over the last 3 years.
o No regulatory action against the sponsor/AMC in the past 3 years.
- Route 2 (Alternate Route):
o Appoint a Chief Investment Officer (CIO) with 10+ years of experience managing ₹5,000+ crore AUM.
o Hire an additional fund manager with 3+ years of experience managing ₹500+ crore AUM.
2. Permitted Investment Strategies
SIFs can launch strategies under three categories:
- Equity-Oriented:
o Examples: Long-Short Equity Funds, Sector Rotation Funds.
o Minimum 65-80% equity exposure, with up to 25% short positions.
- Debt-Oriented:
o Examples: Debt Long-Short Funds, Sectoral Debt Funds.
o Interval-based strategies with weekly liquidity.
- Hybrid Strategies:
o Examples: Active Asset Allocator Funds.
o Dynamic allocation across equity, debt, commodities, and derivatives.
3. Investor Requirements
- Minimum Investment: ₹10 lakh (aggregated across all SIF strategies at the PAN level).
- Accredited Investors: Exempt from the minimum threshold.
- Systematic Plans: SIPs, SWPs, and STPs allowed but must comply with minimum limits.
4. Risk Management & Disclosures
- Risk-Band System: A 5-level risk meter (Level 1 = Lowest, Level 5 = Highest) to be disclosed upfront.
- Portfolio Disclosure: Mandatory bi-monthly portfolio updates on AMC/AMFI websites.
- Scenario Analysis: Illustrate potential losses under adverse market conditions.
- Standard Disclaimer: “Investments in SIFs involve higher risks, including capital loss and liquidity risks.”
5. How Is SIF Different from MF, PMS & AIF?
When comparing Mutual Funds (MFs), Specialized Investment Funds (SIFs), and Portfolio Management Services/Alternative Investment Funds (PMS/AIFs), several key differences emerge. Mutual Funds typically cater to retail investors with a low minimum investment requirement ranging from ₹500 to ₹5,000. In contrast, SIFs are designed for more sophisticated investors, requiring a minimum investment of ₹10 lakh per PAN across all strategies. PMS and AIFs target high net-worth individuals (HNIs) and institutional clients, demanding a significantly higher threshold — ₹50 lakh for PMS and ₹1 crore for AIFs.
In terms of derivative exposure, Mutual Funds are limited to using derivatives mainly for hedging purposes. SIFs offer more flexibility, permitting up to 25% unhedged derivative exposure, whereas PMS and AIFs allow extensive use of derivatives, providing fund managers with significant tactical leeway.
The target investor base also varies. Mutual Funds focus on retail investors, while SIFs aim to serve HNIs and other financially sophisticated individuals. PMS and AIFs are intended for HNIs and institutional investors seeking custom or high-risk strategies. When it comes to portfolio flexibility, Mutual Funds are the most constrained due to strict regulatory oversight. SIFs strike a balance by allowing moderate to high flexibility, whereas PMS and AIFs offer very high portfolio customization, often tailored to individual client objectives.
Lastly, regulatory intensity decreases across the spectrum. Mutual Funds are highly regulated with stringent compliance norms. SIFs operate under moderate regulatory oversight, offering more flexibility while ensuring investor protection. PMS and AIFs are subject to lighter regulation, giving fund managers greater operational freedom.
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