In February 2025, the Securities and Exchange Board of India (SEBI) introduced new framework for Specialized Investment Fund (SIF), the new category of investment product, which aimed to fix gaps between Mutual Funds (MFs) and Portfolio Management Services (PMS) in terms of portfolio flexibility.
- This framework was introduced by SEBI through a circular issued in exercise of powers given under Section 11(1) of the SEBI Act, 1992, read with Chapter VI-C of the SEBI (Mutual Funds) Regulations 1996, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.
- The new framework will come into force with effect from April 1, 2025.
- SEBI has further directed the Association of Mutual Funds in India (AMFI) to issue necessary guidelines and standards for SIF by March 31, 2025.
Key Features:
i.Eligibility Criteria: In order to launch SIFs, Asset Management Companies (AMCs) are required to have minimum 3 years of operation and an average Asset Under Management (AUM) of Rs 10,000 crore over the last 3 years.
ii.Appointment of CIO for SIF: AMCs have been mandated by SEBI to appoint a Chief Investment Officer (CIO) with a fund management experience of 10 years and has managed an average AUM of not less than Rs 5,000 crore.
- Apart from CIO, an additional Fund Manager for the SIF will be appointed with minimum experience of 3 years related to fund management and has managed an average AUM of not less than Rs 500 crore.
iii.Investment Strategies: The new framework allows various equity, debt, and hybrid long-short investment strategies. Investors are required to maintain a minimum investment of Rs 10 lakh across all strategies under an SIF and will not include investments made by investors in regular MF schemes of the same AMC.
- SEBI has clarified that it is mandatory for SIFs to have distinct branding separate from their parent MF, though they may use the name of AMC for initial recognition.
iv.Investing in Derivatives: As per the new framework, investment strategies under SIF are allowed for maximum exposure of 25% of net assets in permissible exchange-traded derivative instruments.
v.Subscription and Redemption: The subscription and redemption frequency of investment strategy will be based on type of investments, including daily, weekly, fortnightly, monthly, quarterly, annually, fixed maturity time period or other suitable intervals.
vi.Single-tier benchmark structure: As per the new framework, the investment strategies of SIF will follow a single-tier benchmark structure.
- Also, the AMCs will select any of wide market indices available, as a benchmark index depending on the investment’s objective and its portfolio.
vii.Offering SIPs and STPs by AMCs: The new framework has allowed AMCs to offer systematic investment options like: Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP) and Systematic Transfer Plan (STP) for investment strategies launched under SIF, subject to the condition they comply with the minimum investment limit.
viii.Entities offering products under SIF: As per SEBI, distributors or entities that are currently engaged in the distribution of MF products will also be eligible to offer products under SIF, but, they are required to having passed the National Institute of Securities Markets (NISM) Series-III: Common Derivatives Certification Exam.
Recent Related News:
In January 2025, SEBI eased settlements norms for brokerage accounts that remain inactive for more than 30 calendar days. It came into force with immediate effect.
- This change aims to reduce procedural inefficiencies for brokers, making the process smoother by eliminating the daily settlement requirement.
- Earlier, brokers were obligated to identify inactive clients and return their funds within 3 working days.
