The Indian mutual fund industry stands on the edge of an important point in its growth. Just as the Unified Payments Interface (UPI) rewrote the rules of the digital payments game, Specialised Investment Funds (SIFs) could be the UPI moment for investments, leading to the revolution of SIF mutual funds.
So, what exactly are Specialised Investment Funds and what will they mean for mutual fund investments? Let’s explore.
What are Specialised Investment Funds?
Specialised Investment Funds (SIFs) are professionally managed investment vehicles designed to cater to well-informed or institutional investors. They offer greater flexibility in investment strategies, risk exposure, and regulatory compliance compared to traditional investment funds. These funds are commonly used in international financial hubs like Luxembourg, but the concept is gaining traction globally—including in India under categories like Alternative Investment Funds (AIFs). SIFs are used around the world to give investors access to a wider pool of investment assets besides conventional equities and bonds.
In India, it reflects the operational framework of Alternative Investment Funds (AIFs) under the sponsorship of the Securities and Exchange Board of India (SEBI). SEBI’s governing guidelines for AIFs were published in February 2025 and aimed to provide a framework for catering to alternative investment avenues.
Key Features of Specialised Investment Funds:
- Targeted at Professional Investors
SIFs are generally not open to the public. They are structured for institutional investors, high-net-worth individuals (HNIs), or those who qualify as “well-informed” under the applicable law. - Flexible Investment Strategy
Unlike traditional mutual funds or UCITS, SIFs can invest in a wider array of asset classes such as:- Private equity
- Real estate
- Hedge funds
- Derivatives
- Infrastructure
- Light Regulatory Oversight
SIFs benefit from less stringent regulatory requirements on risk diversification, disclosures, and capital requirements, though they are still subject to investor protection frameworks. - Tax Efficiency
Many SIFs are structured in jurisdictions that offer favorable tax treatment, making them attractive for international investors seeking tax optimization. - Customizable Structures
They can be set up as standalone funds or umbrella structures with multiple sub-funds, each having its own investment objective and policy.
Relevance in India:
In India, the closest equivalent to SIFs is the Alternative Investment Fund (AIF) framework regulated by SEBI. These include:
- Category I AIFs – Socially or economically desirable investments like start-ups or SMEs
- Category II AIFs – Private equity, debt funds
- Category III AIFs – Hedge funds, high-risk investment strategies
Benefits for Investors:
- Access to niche markets and asset classes
- Professional fund management
- Diversification beyond traditional instruments
- Potential for higher returns (with higher risk)
How SIFs Will Impact Mutual Fund Investing
The introduction and development of SIF-like structures in India has the potential to create a new chapter in mutual fund investing in three main ways:
- Personalization – Allowing investors to customize their portfolios to their risk appetite, time horizon and financial objectives, overcoming the cookie-cutter approach of mutual funds.
- Alternative Assets – Given the broader range of asset classes within SIFs, which include private equity, real estate and commodities, and other cars, the degree of diversification available in SIFs may be largely unavailable in traditional mutual funds.
- Transparency and Control – Investors have gotten comfortable with real-time views of their investment using fintech, which provides an opportunity for more transparency and greater control of investments.
- Wider access – As of April 2025, India’s SIP accounts totalled 8.38 crore with a monthly contribution of ₹26,632 crore. The emergence of SIFs will attract an entire new portion of investors seeking alternative investment solutions.
Significance of the Movement
The possibility of a shift towards SIF-like structures in India’s mutual fund market represents a transition to more sophisticated, investor-friendly products. SIFs provide flexibility and diversification for the industry to meet changing investor needs, and could be the UPI of the mutual fund industry, not only making it easier to invest but improving overall accessibility and usability.
Conclusion: Specialised Investment Funds are much more than an innovative investment vehicle; they represent an evolving, flexible, and inclusive investment ecosystem. The SIF’s significance lies in its ability to offer investors a bespoke investment experience, and in a new promising regulatory landscape, SIFs may become a vital ingredient of the next phase of Indian mutual funds.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.
