Specialized Investment Funds

Questions investors ask

• How is a SIF different from a mutual fund?

  It lives inside the same SEBI mutual fund framework, with the same disclosure rules and the same tax treatment, but the strategy can short, rotate and concentrate in ways a regular scheme cannot. Under SEBI's circular of 27 February 2025 a SIF may take unhedged short exposure of up to 25% of net assets through derivatives, something no regular mutual fund scheme is allowed to do. That flexibility is the point, and it is also the risk.

• Why is the minimum ₹10 lakh?

  SEBI set the threshold, effective 1 April 2025, to keep these strategies with investors who can absorb their complexity. The ₹10 lakh is aggregated across all SIF strategies with one AMC at PAN level, so ₹4 lakh in one strategy and ₹6 lakh in another is compliant, and regular mutual fund holdings with the same AMC do not count towards it. If your holding falls below ₹10 lakh because markets fell, there is no freeze or forced redemption, although SEBI's circular then lets you redeem only the whole remaining amount rather than part of it; if it falls because you redeemed, your units are frozen and you have 30 calendar days to top up before the AMC redeems the balance at the next business day's NAV.

• How are SIFs taxed?

  A SIF sits under SEBI's mutual fund regulations (the SEBI (Mutual Funds) Regulations, 2026 since 1 April 2026), so the fund itself pays no tax under Section 10(23D) of the Income-tax Act, 1961 (a treatment the Income-tax Act, 2025, in force from 1 April 2026, carries forward) and you are taxed only when you redeem or switch. At the rates applying in FY 2026-27, equity-oriented strategies (65% or more in equity) are taxed like equity mutual funds: 20% on gains within 12 months and 12.5% beyond 12 months above the ₹1.25 lakh annual exemption; debt-oriented strategies are taxed at your slab rate, and hybrid strategies with 35% to 65% equity get the 12.5% rate after 24 months, or after 12 months where the units are listed on an exchange. That is one of the clearest differences from PMS, where every trade is a taxable event, and from Category III AIFs, which are taxed at fund level.

• What are the seven SIF strategies SEBI permits?

  SEBI's framework allows three categories and seven strategies: equity (equity long-short, equity ex-top 100 long-short, sector rotation long-short), debt (debt long-short, sectoral debt long-short) and hybrid (active asset allocator long-short, hybrid long-short). An AMC may launch only one strategy under each of the seven, so the label tells you exactly what the fund may go long, short or rotate into. The circular also pairs each category with a redemption frequency, daily for equity strategies, once a week for debt and twice a week for hybrid, with the AMC able to set a different frequency and a notice period of up to 15 working days, both of which must be disclosed in the offer document.

• Who can invest in a SIF, and do I need to be an accredited investor?

  Any KYC-compliant investor can: resident individuals, NRIs, HUFs, trusts and companies, with no investor-category restriction from SEBI. The ₹10 lakh aggregate minimum applies to everyone except SEBI-accredited investors, who are exempt from it under the mutual fund regulations; the strategy's offer document states what applies to them. Accreditation is optional and changes only the entry ticket, not what the strategy does.

• Is there a lock-in, and can I invest through a SIP?

  There is no regulatory lock-in. Subscriptions are typically accepted daily with a 3:00 pm cut-off for same-day NAV, redemptions follow the strategy's stated frequency, and exit loads of nil to 1%, applied for anywhere between 15 days and 12 months, are common. SIP, STP and SWP are available provided the ₹10 lakh aggregate minimum is met and maintained, so a SIP on its own does not satisfy the threshold: the ₹10 lakh has to be in place first.

• How risky is a SIF compared with a mutual fund?

  More, and differently. Every extra lever, short selling up to 25% of net assets, derivatives with gross exposure up to 100% of NAV, sector concentration, adds a risk that a long-only fund does not carry, and a short position loses money when the market rises. SEBI requires each strategy to carry a five-level Risk-band (1 lowest to 5 highest) reviewed monthly and published on the AMC and AMFI websites within 10 days of month-end, plus monthly stress tests on how many days it would take to sell 25% and 50% of the portfolio.

• What does a SIF cost, and is a direct plan available?

  SIFs offer direct and regular plans like mutual funds, and the total expense ratio varies widely by strategy: across live strategies in October 2026, direct plan TERs ranged from roughly 0.8% to 4.6% a year and regular plan TERs from about 1.3% to 5.8%. The distributor's commission is paid by the AMC out of the regular plan TER, not as a separate fee from you. Ask for the TER of the exact strategy and plan before investing, because the gap between the cheapest and dearest strategy is far wider than in regular mutual funds.