What sets them apart and how to resist existing investment options? Here’s everything you need to know to dig deeper.
What is SIF?
SIF is a special investment fund. They are high-risk, high-reward versions of traditional mutual funds. The minimum ticket size for SIF is ₹1 million for all SIFs.
For example, you can invest ₹In two different SIFs it is 500,000.
The SIF framework will come into effect on April 1, 2025, and the Association of Mutual Funds of India (AMFI) issued the necessary implementation guidelines on March 31, 2025.
What is unique about SIF?
SIF stands out, able to occupy the exposed short pose with options and utilize leverage. Unlike traditional mutual funds, they can set up specific evacuation windows (monthly, monthly or even quarterly) instead of providing daily liquidity.
Will SIF replace Portfolio Management Services (PMS)?
No, SIF will not replace PM.
PMS is often a long-standing investment strategy that can distinguish itself by focusing on certain stocks. PMS investments are usually concentrated on high convictions, long-term holdings.
SIF will not relax the rules surrounding portfolio concentration, which means that the PMS strategy will continue to attract investors seeking targeted high-quantile equity exposure.
Who does SIF compete with?
SIF mainly competes with Class III Alternative Investment Funds (AIFS) (Long-term AIF).
This is because SEBI allows SIF to be exposed up to 25%. Furthermore, by using options, SIF can gain a lot of leverage while maintaining tax efficiency.
CAT III AIF must deduct taxes at the marginal tax rate of marginal transaction income, which is as high as 39%.
What are the different SIF categories?
Equity, debt and mixed SIF.
Equity SIFs are allowed to be exposed up to 25% of naked derivatives, while debt SIFs do not face such restrictions.
In the mixed category, asset allocators and long-term funds have the potential to develop into “absolute returns” funds – strategies designed to provide consistent returns regardless of market conditions.
What is the product under SIFS?
Now, structured products can be launched through SIFS, thus losing tax advantages when the 2023 budget is removed from Market Linked Bonds (MLDS).
Debt-centric SIFs can also be structured to positions on interest rate changes, such as betting on funds that have risen interest rates. In the debt sector, SIF has specific risk limits, allowing up to 20% of net asset value (NAV) in AAA-rated securities, 16% of AA-rated securities, 12% of A-rated securities or lower securities, and allowing an additional 5% extension through board approval.
In addition, absolute returns funds designed to generate returns under any market conditions (whether bullish or bearish) can also be structured under SIF.
How will SIF be taxed?
SIF will be similar to mutual funds.
After a one-year holding period, a 20% short-term capital gains (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (STCG) tax (12.5% will be paid.
Mixed SIFs with less than 65% of debt allocation will be taxed at the STCG board rate for investors, while LTCG will be taxed at a rate of 12.5% after a two-year holding period.
Debt SIF, regardless of holding period, will be taxed at the investor’s flat rate.
Who can launch SIF?
Funds eligible to launch SIFs must be operated for at least three years, with at least asset management (AUM) ₹Rs 10,000 crore, there is no adverse order from SEBI.
Also, if the fund house has at least 10 years of experience, they have at least 10 years of experience ₹50 million.
Who can sell Sifs?
Distributors who wish to distribute SIFs must clear the NISM (National Securities Market Research Institute) derivative certification exam.
This certification ensures that they have an in-depth understanding of derivatives, market regulations, risk management and structured investment strategies.
What about the risks?
SIF will have its own risk tag system from level 1 (minimum risk) to level 5 (most risk). They also need to provide investors with “program analysis” to explain the risks in them.
