SIF : A New baby is born

 

SIF  : A New baby is born

What is SIF and How it is different from MF ??

What is MF

Most of us are familiar with Mutual Fund .  Mutual Fund pools money from many investors and invests in stocks, bonds, commodities  or a combination thereof, according to a stated investment objective. It is governed by SEBI’s mutual fund regulations and offers:

• Low minimum investment (as low as ₹500 SIPs)
• High transparency with daily NAVs
• Simple long-only strategies (equity, debt, hybrid, index)
• High liquidity with open-ended redemptions

What is a Specialised Investment Fund (SIF)?

A Specialised Investment Fund (SIF) is a new category of mutual fund-like scheme permitted to run complex strategies such as long-short, arbitrage, special situations, and hybrid allocations. It offers:

• Minimum investment of ₹10 lakh (HNIs, family offices)
• Single, defined advanced strategy per scheme
• Combines mutual fund governance with AIF-style flexibility
• Interval or restricted redemption structures

Key Differences Between SIFs and Mutual Funds

Below is a detailed comparison across major parameters.

1. Structure & Regulation

• Mutual Fund: Operates entirely under SEBI Mutual Fund Regulations. Every scheme is part of a mutual fund trust.
• SIF: Housed inside the mutual fund structure but regulated separately under SEBI’s SIF framework, with more flexibility for strategy.

2. Investment Strategy

• Mutual Fund: Primarily long-only (equity, debt, hybrid, index funds). Limited derivative usage for hedging.
• SIF: Advanced strategies like equity long-short, sector rotation, special situations, arbitrage, covered calls, pair trades, etc.  Detailed Guide on Types of SIFs in India.

3. Minimum Investment

• Mutual Fund: Very low entry barrier; ₹500–₹5,000 SIPs possible.
• SIF: High entry barrier; typically ₹10 lakh minimum per investor per strategy.

4. Liquidity / Redemption

• Mutual Fund: Mostly open-ended; daily purchase and redemption at NAV.
• SIF: Many are interval funds with limited redemption windows (e.g. twice a week) or lock-in periods.

5. Risk Profile

• Mutual Fund: Risks are linked to underlying asset class (equity, debt) but generally transparent and diversified.
• SIF: Strategy risk + derivative risk + liquidity risk. More complex than regular MFs; may exhibit hedge fund-like volatility.

6. Taxation

• Mutual Fund: Taxation depends on category (equity/debt); LTCG/STCG as per current laws.
• SIF: Generally LTCG at 12.5% beyond 12–24 months depending on asset class; taxed in investor’s hands; may be more efficient vs Cat III AIFs.

7. Transparency & Reporting

• Mutual Fund: Daily NAV disclosure, monthly factsheets, portfolio transparency.
• SIF: NAV disclosure as per SID; complex positions may be harder for retail investors to interpret.

8. Investor Suitability

• Mutual Fund: Suitable for retail investors, beginners, SIP investors.
• SIF: Designed for HNIs, sophisticated investors seeking tactical/hedge strategies.

Key Differences

 

Regulation : MF is strictly regulated by SEBI , While SIF is also regulated by SEBI but in addition has SIF framework regulation also,

 

Strategies : Its strategy is Long only , Long means only buy ( Equity, Debt, Commidity) and benefit from price rise in underlying Assets . So it mostly works in Bullish market. (MF does not do Short selling means first selling High and buying cheap later.)

SIF strategy is combination of Long, Short, Derivatives (Future, Option) , Hedge   all so it performs both in Bullish and Bear Market.

 

Minimum Investment : In MF you can invest as low as Rs. 500 one time or SIP  so it is popular among common people ( Aam Janta ki choice hai ye). In SIF minimum investment is Rs. 1000000 (Ten Lakh) initially   then can do SIP of any amount.

 

Liquidity : In  MF one can buy or sale any day and any time so it is highly Liquid. SIF can be purchased at interval and  redemption is limited only twice a week.

 

Risk : In MF risk is in Asset class components and also MF does not perform much in Bear market ( When market is falling). SIF strategy is Long – Short , Hedge all so can perform both in Bull as well as Bear Market

 

Transparency : MF is highly transparent , NAV is daily disclosed , you instantly know value of your Fund , SIF is complex investment strategy some components values are known only on expiry days

 

Taxation : MF taxation is Simple as it has only 3 classes Equity , Debt and Hybrid  and all are Long so only LTCG and STCG apply  .  SIF has many components Taxation on derivatives, Short and Long is different  and require calculation of Capital gain differently

     

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Conclusion

Both Mutual Funds and SIFs operate under SEBI rules and regulations. In fact SIF is new variety of  Mutual Fund itself . But Mutual Fund is very simple and with access of common people . Garib aur Aam Janta bhi MF mei invest kar sakte hain . SIF is for rich and affluent class as every one can not invest Rs. 10 Lakh in one go . Before planning to invest in SIF  assess your income , corpus ,  risk tolerance, liquidity needs, and investment objectives before deciding.

Which one will give you more Profit on your Investment ??

That is the Biggest question . Well MF is proven strategy and every one know that investing in MF is always profitable in the Long run ( 3  years beyond) but SIF is a new born baby still in cradle , It is yet to see the light of Market , Face its volatiliy , show its maturity then only  future will tell its success rate.

Recently 3 SIF has been launched SBI MAGNUM SIF , Edelweiss Altiva SIF and Quant Mutual Funds QSIF and all of them are still in NFO stage.

If you have any queries , please ask us any day any time.

Happy Investing

 

@Ajit