SEBI introduces new asset class, Specialised Investment Fund (SIF)

The Securities and Exchange Board of India (SEBI) has amended its regulations to introduce a new asset class known as the Specialised Investment Fund (SIF), aimed at catering to investors with higher risk appetites. This new framework is designed to fill the gap between traditional mutual funds (MFs) and Portfolio Management Services (PMS), providing more tailored investment opportunities.

The SEBI had initially proposed the concept of the SIF back in July 2024, and with the recent notification, the new asset class is set to redefine investment options in the country. The SIF will allow investments of Rs 10 lakh or more from investors across various investment strategies, providing a flexible platform for high-net-worth individuals and other sophisticated investors. Notably, the Rs 10 lakh minimum investment requirement will not apply to accredited investors.

 

Under the new regulations, the investment strategy in SIFs could be open-ended, close-ended, or interval-based, with subscription and redemption frequencies clearly outlined in the offer document. The fee structure for these strategies will be governed by SEBI's Regulation 52, in line with the mutual fund regulations.

To ensure professional management of SIFs, the fund manager will be required to hold the relevant certification from the National Institute of Securities Markets (NISM).

In terms of investment restrictions, the new rules impose a cap on investments in debt instruments. Specifically, no more than 20% of a SIF's Net Asset Value (NAV) can be invested in debt instruments issued by a single issuer that are not investment grade. However, government securities, treasury bills, and triparty repos involving these instruments are exempt from this restriction.

Additionally, the SIF can invest in units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). However, the new regulations limit SIFs from owning more than 20% of the units issued by a single issuer of REITs and InvITs. This ownership limit includes the 10% cap already imposed on mutual fund schemes.

This move is expected to provide greater investment opportunities for high-risk investors and is likely to spur innovation in India's investment landscape, as it creates a new avenue for those seeking alternative strategies beyond conventional mutual funds.

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