SEBI Launches Specialized Investment Funds for High-Risk Investors

The Securities and Exchange Board of India (SEBI) has introduced a new asset class called Specialized Investment Funds (SIFs). These funds aim to bridge the gap between mutual funds and portfolio management services (PMS). SIFs offer advanced investment strategies and cater to high-risk investors seeking flexible options.

Structure and Flexibility

SIFs can be structured as open-ended, closed-ended, or interval funds. This structure provides flexibility in portfolio construction. Investors must invest a minimum of Rs 10 lakh per AMC across all strategies. Moreover, accredited investors receive exemptions.

Risk Mitigation and Exposure Limits

To reduce risks, SEBI has set strict exposure limits. These include capping allocations to individual issuers, companies, and sectors. For instance, SIFs can allocate up to 15% to a single security, compared to the 10% cap in mutual funds. Similarly, fixed-income strategies can allocate 20% to a single issuer, extendable to 25% with board approvals.

Target Audience

SIFs target high-net-worth individuals (HNIs) and advanced investors. They seek sophisticated strategies and broader exposure limits. Consequently, portfolio managers can create innovative, customized products. These strategies often cannot be accommodated by traditional mutual funds.

Investor Protection

SEBI ensures clear differentiation between SIFs and mutual funds. They enforce distinct branding and strict risk controls. Therefore, SIFs aim to reduce unregistered and unauthorized investment schemes that promise unrealistic returns. These funds offer a regulated alternative with built-in investor protection measures.