Listen to this articleLooking to boost your returns? High-return investment options like Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) are available, but they come with hefty minimum investment requirements.
Unlike PMS and AIF, which require minimum investments of Rs. 50 lakh and Rs. 1 crore respectively, SIF allows investments starting at Rs. 10 lakh, making it more accessible while maintaining a lower risk profile.
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The Middle Ground: Introducing the Specialized Investment Fund (SIF)
So, what’s the alternative for those seeking a middle ground between equity mutual funds and these premium investment options? The Securities and Exchange Board of India (SEBI) has introduced a new scheme designed to fill this gap.
A Specialized Investment Fund (SIF) is a new investment option introduced by SEBI, designed for investors seeking higher returns with a manageable risk profile.
It requires a minimum investment of Rs. 10 lakh and provides opportunities in equity, debt, REITs, and InvITs.
What’s more, SEBI has already granted approval to mutual fund companies that are currently operating to launch this fund.
Is this the right opportunity for you to step up your investment game?
Clear Distinctions in Branding and Advertising
While there’s no need to separate the operations of regular mutual funds and the new specialized fund, SEBI has emphasized that clear distinctions should be maintained in branding and advertising between the two.
But, why stop there? SEBI also requires that a dedicated website be created exclusively for this specialized fund, through which the schemes must be launched.
What about the cost?
Cost and Fund Management: What You Need to Know
The Total Expense Ratio (TER) for this fund will be similar to that of regular mutual fund schemes. This means that as the assets under management grow, the expense ratio will decrease.
Also, mutual fund companies can only launch this fund after obtaining approval from SEBI. But who will manage these funds? The fund manager must be a qualified professional, having passed the NISM certification exam.
Is this the kind of structured approach you expect when investing in something as critical as a specialized fund?
Types of SIFs: What’s Best for You?
Mutual fund companies can launch this fund as one of three types:
- Close-Ended Fund with a fixed maturity period
- Open-Ended Fund allowing investments and exits at any time
- Interval Fund, combining the benefits of both close-ended and open-ended structures
For interval funds, investors will only be allowed to exit at specific intervals.
But what does that mean for investors? In an interval fund, investors will only be allowed to exit at specific intervals.
Where Does the Money Go?
In this SIF scheme, up to 20% of the investments can be allocated to money market and debt market instruments.
But when it comes to equity investments, the SIF can only invest a maximum of 10% in any single company. Additionally, SIFs can invest up to 20% in REITs and InvITs.
Risk and Suitability: Is SIF the Right Fit for You?
SSIFs are ideal for upper-middle-class investors who:
- Seek better returns than mutual funds.
- Are comfortable with the ₹10 lakh minimum.
- Understand the moderate risk associated with such investments.
However, this is not for small investors due to the higher entry barrier and risk involved.
Does this sound like the right fit for you?
Exciting, But Don’t Rush In!
While the idea of SIFs is exciting, jumping in without preparation can be risky.
What You Should Do
- Wait for Launches: Study the strategies and past performance of SIF schemes once available.
- Consult Professionals: Seek advice from a Certified Financial Planner (CFP) or a qualified Mutual Fund Distributor (MFD).
- Compare Options: Look at how SIFs stack up against other investment avenues like equity funds, PMS, or AIFs.
Final Takeaway
The Specialized Investment Fund (SIF) could be the perfect middle ground for investors who seek higher returns than traditional mutual funds but aren’t ready for the hefty minimums required by PMS or AIFs.
With a minimum investment of Rs. 10 lakh and a managed risk profile, SIFs provide a unique opportunity for investors to diversify into equity, debt, REITs, and InvITs, while enjoying a structure approved and regulated by SEBI.
However, keep in mind that, The SIF is intended for upper-middle-class investors with a minimum investment of Rs. 10 lakh. It is not suitable for small investors due to its higher minimum investment and associated risks.
