Specialised Investment Funds (SIFs) were introduced by SEBI in 2025 to create an investment category positioned between conventional mutual funds and more sophisticated investment vehicles. With a minimum investment threshold of ₹10 lakh for most investors, SIFs can offer strategies with greater flexibility in portfolio construction than traditional mutual fund categories.
As SIFs gain attention among affluent investors, several assumptions have emerged around what they are, who they are meant for and how they work. Here are five common myths worth separating from the facts.
Myth 1: SIFs are simply another type of AIF
Reality: They are a distinct SEBI-regulated mutual fund structure.
The terminology can be confusing because some SIF strategies may use investment approaches associated with alternative investments. However, SIFs operate within the mutual fund regulatory framework.
SEBI introduced SIFs through amendments to the Mutual Funds Regulations and subsequently established a specific regulatory framework governing their investment strategies, minimum investment threshold and other requirements.
This makes it important to evaluate a SIF based on its actual strategy and regulatory structure rather than assuming that it is an AIF with a different label.
Myth 2: A ₹10 lakh investment means you need ₹10 lakh in every SIF strategy
Reality: The ₹10 lakh threshold applies across the SIF’s investment strategies, rather than separately to each strategy.
SEBI’s framework requires an aggregate investment of at least ₹10 lakh across the investment strategies offered by a particular SIF, measured at the investor’s PAN level. The threshold does not include the investor’s holdings in the AMC’s regular mutual fund schemes.
This distinction matters when evaluating how a SIF can be used within a broader portfolio. An investor may allocate across different strategies offered within the same SIF while satisfying the aggregate threshold, subject to the specific scheme documentation.
The framework also provides an exemption from the minimum investment requirement for accredited investors.
Also Read: What Is SIF (Specialised Investment Fund)? A New Investment Category Between Mutual Funds and PMS
Myth 3: SIFs are designed to deliver higher returns than mutual funds
Reality: Greater strategy flexibility does not guarantee higher returns.
SIFs are designed to accommodate more specialised investment strategies. Depending on the strategy, this can involve approaches such as long-short investing, more concentrated portfolios or greater use of derivatives within prescribed limits.
But greater flexibility can work in both directions.
A strategy that can take positions designed to benefit from different market conditions can also introduce additional sources of risk. Performance will ultimately depend on the investment process, portfolio construction, market conditions, costs and risk management.
SEBI’s framework also places specific investment limits on SIF strategies. For example, SIFs can take unhedged short exposure through eligible exchange-traded derivatives of up to 25% of net assets for purposes other than hedging and portfolio rebalancing.
The presence of such flexibility should therefore not be interpreted as a promise of superior returns.
Myth 4: SIFs are only for investors who want aggressive or high-risk strategies
Reality: The risk profile depends on the specific investment strategy.
“SIF” describes the regulatory structure; it does not describe a single investment philosophy.
One strategy could use a long-short approach, while another could employ a different portfolio construction framework. The appropriate question is therefore not simply whether a fund is an SIF, but what the particular investment strategy is designed to do.
Investors should examine its asset allocation, permitted instruments, concentration limits, use of derivatives, liquidity provisions, redemption terms and risk-management framework.
For example, SEBI’s framework imposes limits on individual securities and sectors, while also prescribing specific restrictions around debt securities and derivatives.
The label alone tells an investor relatively little about the risk being taken.
Myth 5: SIFs eliminate the need for traditional portfolio diversification
Reality: A SIF is a portfolio component, not a replacement for portfolio construction.
A specialised strategy can potentially add a different source of return to an investor’s portfolio, but it does not remove the need to consider diversification across asset classes, strategies and risk factors.
An investor considering a long-short SIF, for instance, should examine how its market exposure, factor exposure and drawdown behaviour interact with their existing equity, fixed-income and alternative investments.
This is particularly important because two investments can appear different by name while carrying similar underlying risks. A portfolio that combines several equity-oriented strategies may still be heavily exposed to the same market or factor risks.
What investors should actually evaluate
Instead of focusing on the SIF label, investors should assess five things:
1. Strategy: What exactly is the manager trying to capture?
2. Return driver: Is performance expected to come from market direction, stock selection, relative value, income or another source?
3. Risk: What can cause a permanent or significant loss of capital?
4. Liquidity: How frequently can investors redeem, and are there notice periods or other restrictions?
5. Portfolio role: What does the strategy add that existing investments do not?
SIFs expand the range of strategies available within the regulated mutual fund ecosystem, but the additional flexibility makes understanding the underlying strategy even more important. For investors evaluating SIFs, the key question is not whether they are “better” than conventional mutual funds or AIFs. It is whether a particular SIF strategy has a clearly understood role within the investor’s broader portfolio.
You may also like to read: The Future of Alternative Investments in India: A New Era of Wealth Creation
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