SIF Explained: The ₹10 Lakh Category Between Mutual Funds and PMS

For years, Indian investors had a gap in the middle of their options. On one side sat mutual funds: simple, regulated, and open to anyone with ₹100 or ₹500. On the other sat PMS and AIFs, which offer more flexible strategies but ask for ₹50 lakh and ₹1 crore to begin with.

If you had ₹15 or ₹25 lakh to invest and wanted something more sophisticated than a regular mutual fund, there was very little between the two.

SEBI's answer is the Specialised Investment Fund (SIF), which came into force on 1 April 2025. This guide explains what an SIF is, how it differs from mutual funds and PMS, and how to decide whether it deserves a place in your portfolio.

What is a Specialised Investment Fund (SIF)?

A SIF is a SEBI-regulated investment product that sits inside the mutual fund framework but is allowed to use more flexible strategies than a regular mutual fund. The key difference is that it can take limited unhedged short positions through derivatives, which means it can try to benefit when a stock or the market falls, not just when it rises.

In simple terms, a SIF is like a mutual fund with a bigger toolkit, offered only to investors who can meet a higher entry threshold and who are expected to understand more complex risks.

A few important points:

• SIFs are launched by SEBI-registered mutual fund houses (AMCs), under SEBI's rules.
• They must carry their own distinct branding, separate from the AMC's regular mutual fund schemes.
• Each SIF strategy publishes an Investment Strategy Information Document (ISID) that explains its objective, approach and risks. Read this before investing.

The ₹10 lakh rule, explained

The minimum investment is ₹10 lakh per investor, measured at the PAN level across all SIF strategies of a single AMC. It is not ₹10 lakh per strategy.

For example, you could put ₹6 lakh in one strategy and ₹4 lakh in another strategy from the same AMC, and you would meet the requirement. Accredited investors are exempt from this minimum.

Two things investors often miss:

• The threshold has to be maintained. AMCs are required to monitor it. If your holding falls below ₹10 lakh because of your own redemptions, units can be redeemed. A fall caused purely by market movement is treated differently, but you may then only be able to redeem the entire remaining amount.
• Eligibility applies to the AMC as well. Only fund houses that meet SEBI's experience and size criteria, or that appoint a qualified senior investment team, can launch SIFs.

What strategies can SIFs follow?

SEBI has permitted a defined set of strategies at launch:

The short exposure cap of 25% of net assets is the defining feature. A regular mutual fund can use derivatives only for hedging and portfolio rebalancing. A SIF can go further.

SIF vs PMS vs Mutual Fund: the comparison

Taxation: the quiet advantage

This is where SIFs differ sharply from PMS.

SIFs follow mutual fund taxation. There is no fund-level tax, and you pay tax only when you redeem. For equity-oriented strategies, long-term capital gains (holding period above 12 months) are taxed at 12.5% and short-term gains at 20%. Debt-oriented strategies are taxed at your applicable slab rate.

In a PMS, every buy and sell the manager makes creates a capital gains event in your name. An active PMS can generate a lot of short-term gains in a year, and you pay tax on them whether or not you redeemed anything.

Tax rules change from time to time, so confirm the current position with your tax advisor before investing.

The risks you should understand

A bigger toolkit means more ways to get things wrong. Before you consider an SIF, be clear about these:

• Short positions can lose money in a rising market. A long-short fund that is short while markets rally can underperform badly.
• Manager skill matters far more. In a plain index fund, the market does the work. In a long-short strategy, results depend heavily on the fund manager's calls.
• Track records are short. SIFs only began in April 2025, so most strategies have limited history. Past performance of the AMC's regular mutual funds does not tell you how its SIF strategy will behave.
• Liquidity is not always daily. Some strategies have weekly or twice-a-week redemption windows, and some may have a notice period.
• Derivatives add complexity. Understand how the strategy uses them before you invest.
• The ₹10 lakh lock-in on eligibility. You need to stay above the threshold, which reduces your flexibility to partially withdraw.

Nothing about the SIF framework guarantees returns or protects you from loss.

Who should consider an SIF?

An SIF can make sense if most of these are true:

• Your core portfolio (diversified equity and debt mutual funds, emergency fund, insurance) is already in place.
• You have ₹10 lakh or more of surplus money that you will not need for several years.
• You understand that this is a satellite allocation, not a replacement for your core investments.
• You are comfortable with strategies that may behave differently from the broader market.

An SIF is probably not the right fit if you are still building your basic portfolio, if the ₹10 lakh would be a large share of your total savings, or if you need the money in the near term.

SIF or PMS: how to choose

• Choose SIF if you want exposure to long-short strategies in a regulated mutual fund wrapper, with mutual fund-style taxation and a lower entry ticket.
• Choose PMS if you have a larger portfolio, want a direct stock-holding structure, or want a highly customised or concentrated approach, and you accept investor-level taxation on every trade.
• Stay with mutual funds if your goals are met by diversified funds, which is true for most investors.

Many investors will use all three at different points in their journey, in different proportions.

A checklist before you invest in an SIF

• Read the ISID of the strategy in full.
• Check the AMC's eligibility route and the fund manager's track record in long-short or derivatives-based strategies.
• Confirm the redemption frequency and any notice period.
• Understand the maximum short exposure and how the fund manager uses it.
• Check the expense ratio.
• Make sure the amount is surplus and fits your overall asset allocation.
• Discuss it with your mutual fund distributor or advisor before investing.

Frequently asked questions

Is SIF the same as PMS?

No. SIFs are pooled funds under the mutual fund framework with mutual fund-style taxation. PMS manages a separate portfolio in your name under different regulations.

Is the ₹10 lakh needed for each strategy?

No. It applies across all SIF strategies of one AMC at the PAN level.

Are SIF returns guaranteed?

No. SIFs are market-linked and carry the risk of loss, including from short positions.

Can I do an SIP in an SIF?

This depends on the AMC and strategy. Check the ISID. Note that you still need to reach and maintain the ₹10 lakh minimum.

Is an SIF safer than PMS?

The regulatory framework differs, but safety depends on the strategy, the manager and your allocation, not just the product label.

How SN Wealth can help

Whether an SIF belongs in your portfolio depends on your goals, your existing allocation and your risk capacity. At SN Wealth, we look at the whole picture first, then decide where a product like this fits, if at all.

To talk through your situation, reach out to our team.

Disclaimer: Mutual fund and SIF investments are subject to market risks. Read all scheme-related documents, including the ISID, carefully before investing. Past performance is not indicative of future returns. This article is for educational purposes only and is not investment, tax or legal advice. SN Wealth is an AMFI-registered mutual fund distributor (ARN: 82095).

← Back to all articles