SEBI's Strategic Move: Introducing Specialised Investment Funds
The Securities and Exchange Board of India (SEBI) has introduced Specialised Investment Funds (SIFs) to cater to a specific segment of investors.
These funds, operational since April 1, 2025, require a minimum investment of ₹10 lakh, positioning them between the accessible mutual fund market and the higher-threshold Portfolio Management Services (PMS).
Bridging the Investment Gap
SEBI recognized that individual investor risk profiles vary, prompting the creation of SIFs. With mutual funds accessible from a few hundred rupees and PMS starting at ₹50 lakh, SIFs fill a crucial intermediary space for sophisticated investors with substantial capital but not necessarily HNI status.
AMCs were mandated to give SIFs distinct branding to avoid investor confusion, with major players like Quant, SBI, Edelweiss, Tata, and ICICI Prudential launching them, predominantly focusing on long-short strategies.
The Rise of Long-Short Strategies
The long-short equity strategy has gained traction within SIFs, particularly amidst current geopolitical and macroeconomic volatility. This approach involves investing at least 80% in equities and up to 25% in short exposures via derivatives. The aim is to profit from both rising and falling markets.
Variants like 'Equity Ex-Top 100 Long-Short' target mid and small-cap stocks for price inefficiencies, while 'Sector Rotation Long-Short' tactically allocates across sectors based on bullish or bearish views.
Early Performance and Risks
Despite the strategic appeal, early performance data for equity SIFs following long-short strategies is mixed, with several funds lagging behind benchmarks like the Nifty 500 TRI. Funds launched in September and December 2025, such as QSIF Long-Short Equity SIF and Divinti Equity Long Short SIF from ITI Mutual Fund, have posted negative returns. Newer entrants in January 2026 also show modest negative absolute returns.
The inherent risk in shorting requires strong conviction, and fund manager assessment of market direction can prove incorrect, leading to volatility that may not always favor the fund. Liquidity can also be a concern; if an investment falls below the ₹10 lakh threshold due to market fluctuations, partial redemptions may be disallowed, forcing investors to stay put or exit entirely.
Taxation and Investor Suitability
Equity SIFs are taxed similarly to mutual funds. Short-term capital gains (holding period ≤ 12 months) are taxed at 20% plus applicable surcharges and cess. Long-term capital gains (> 12 months) are taxed at 12.5% on gains exceeding ₹1.25 lakh in a financial year.
These SIFs are not universally suitable. Investors must carefully consider their personal risk profile, investment objectives, and horizon before committing funds, especially since most SIFs are still establishing a performance track record.