Understanding SIF

What is SIF ?

 What Are Long-Short Mutual Funds and How Do They Work?

Recently SEBI has approved a new Asset Class Called SIF Specialized Investment Fund (SIF)?

The Specialized Investment Fund (SIF) is a new category of investment product introduced by SEBI to bridge the gap between Mutual Funds (MFs) and Portfolio Management Services (PMS). While in Mutual Fund you can invest as low as Rs 500 , A PMS requires minimum 50 Lakh to invest . This 50 Lakh requirement is almost beyond the capacity of middle class investors , so  the regulator believes that while over the years, India’s financial market has witnessed an expansion in investment products with varying degrees of risk, complexity, and regulatory oversight, a gap exists between mutual funds and PMS. So the Concept of  SIFs was introduced which requires only 10 Lakh to invest  to provide a middle ground, offering portfolio flexibility while ensuring regulatory compliance and investor protection like MF and also benefit of PMS with regulatory protection.

To achieve the success of SIF the Concept of Long Short Fund has emerged and many Fund Houses has started Launching their SIF products like Quant MF has started QSIF Long Short Fund, SBI MF launching MAGNUM SIF and Edelweiss MF launching Altiva SIF and many other Fund houses are in the process of Launching their SIF products

Basically all these SIF will be based on “Long Short” concept

What is LONG SHORT Concept ?

We know that traditional MF schemes invests in equity funds Long way . (A long means Buy a stock first  in capital market )  – they buy stocks first at lower price  and benefit selling it when stock prices move up. Accordingly, equity funds can typically only deliver positive returns in bullish market conditions when stock price are moving up.

But there is another concept in stock market called “Short” means sell first and buy later . you will say how it is possible ? when we do not have stock at all how can we sell first ?

Well those familiar with stock market are also familiar with ‘Stock Borrowing “ &  “Future and Option” called derivatives strategies

Short selling means  borrowing a security, selling it on the open market, and then repurchasing it later at a lower price to return to the lender (in BEARISH market ).Benefitting from difference of prices.  Essentially, a short seller is betting that the security price will go down.

When a Fund Manager believes that a particular stock price may fall for some period , he may adopt short selling strategy – may sell the stock (through F&O or Stock Borrowing strategies) at a small price called premium  and later buy  it when   price falls and make profit ..

However it is risky strategy  It requires a deep understanding of market mechanics, careful risk management, and the ability of Fund manager to take quick decision of timely  entering and exit of market .

 So essentially in Long & Short fund , fund manager  makes profit no matter whether market is Bullish or Bearish

Is it for you ???

First understand that nothing is risk free in stock market , some actions and strategies have high risk while other have comparatively low risk. If you have long term perspective , Risk taking ability and good capital to Invest (Minimum 10 Lakh ) you can subscribe to SIF and get better return then MF .

@Ajit