A specialised investment fund (SIF) is the product SEBI created to sit between a mutual fund and a portfolio management service: a scheme run by a mutual fund house, under mutual fund rules, that can bet against part of the market and is sold only to people who put in at least ₹10 lakh. In October 2025 the category held ₹2,010 crore across four strategies. By the end of August 2026 it held ₹31,175 crore across 33, according to the Association of Mutual Funds in India (AMFI).
That is fifteen and a half times as much money in ten months, and 96% of it is new money rather than market gains. Most people putting ₹10 lakh or more into a specialised investment fund are doing it on the strength of a product that is barely a year old. This guide sets out what SEBI actually allows, works through the two rules that catch investors out, and shows where the money has gone so far.
Where a SIF sits: between a mutual fund and a PMS
SEBI’s own framing, in the circular that set the rules on 27 February 2025, is that investment products become “progressively more flexible from Mutual Funds to Portfolio Management Services to Alternative Investment Funds”, and that “a gap has emerged between MFs and PMS in terms of portfolio flexibility”. The SIF is SEBI’s answer to that gap. Legally it is not a new kind of fund at all: the Mutual Funds Regulations, 1996 were amended to add it, and each strategy is a mutual fund scheme launched under the SIF.
| Mutual fund | SIF | PMS | AIF | |
|---|---|---|---|---|
| Minimum investment | None set by SEBI | ₹10 lakh (per PAN, across the SIF) | ₹50 lakh | ₹1 crore |
| Rulebook | SEBI (Mutual Funds) Regulations, 1996 | The same regulations, Chapter VI-C | SEBI (Portfolio Managers) Regulations, 2020 | SEBI (AIF) Regulations, 2012 |
| Unhedged short positions | No | Up to 25% of net assets | More flexible than a SIF, per SEBI | Most flexible, per SEBI |
| Who runs it | Mutual fund house | Mutual fund house, under a separate brand | Portfolio manager | Fund manager |
Sources: SEBI SIF circular of 27 February 2025; SEBI Portfolio Managers Regulations, 2020 and SEBI's portfolio manager FAQs; SEBI AIF FAQs. The short-position row for mutual funds reflects the SIF circular's explanation that the 25% unhedged short allowance is in addition to derivatives used for hedging and rebalancing.
The ₹10 lakh line puts a SIF within reach of far more people than a PMS or an AIF. For the everyday options below that line, from PPF to index funds, the rates and tax rules are in our guide to where to invest in India.
The seven strategies SEBI permits
A SIF cannot run anything it likes. The circular lists seven categories of “investment strategy” and allows each SIF only one strategy per category, the same anti-proliferation rule that applies to mutual fund scheme categories.
| Strategy | What it must hold | Short limit | Redemptions at least |
|---|---|---|---|
| Equity Long-Short | At least 80% in equity | 25% unhedged | Daily (AMC may choose less often) |
| Equity Ex-Top 100 Long-Short | At least 65% in equity outside the 100 largest stocks | 25%, in stocks other than large caps | Daily |
| Sector Rotation Long-Short | At least 80% in equity of up to four sectors | 25%, at the sector level | Daily |
| Debt Long-Short | Debt across durations | Through exchange-traded debt derivatives | Once a week |
| Sectoral Debt Long-Short | Debt of at least two sectors, no more than 75% in one | 25%, at the sector level | Once a week |
| Active Asset Allocator Long-Short | Equity, debt, REITs/InvITs, commodity derivatives, moved dynamically | 25% | Twice a week |
| Hybrid Long-Short | At least 25% equity and at least 25% debt | 25% | Twice a week |
'Short limit' is the maximum unhedged short exposure through derivatives, as a share of net assets. The redemption column is SEBI's minimum; an AMC may offer redemptions less often. A sector-level short means that if the fund shorts a sector, every holding in that sector is held short.
Three portfolio limits apply across all of them. A strategy cannot put more than 20% of its net assets into debt of a single AAA-rated issuer, 16% for AA and 12% for A and below, with a further 5% allowed with trustee and AMC board approval. It cannot put more than 25% into the debt of one sector. And its total gross exposure across equity, debt, derivatives, REITs and InvITs cannot exceed 100% of net assets, the same cap that applies to mutual funds.
Who is allowed to run one
A fund house qualifies by one of two routes. Either it has been operating for at least three years with average assets of at least ₹10,000 crore over those three years, or it appoints a chief investment officer for the SIF with at least ten years of fund management and ₹5,000 crore of average assets managed, plus a second fund manager with three years and ₹500 crore. In both cases, SEBI must not have taken action against the sponsor or AMC under the main enforcement sections of the SEBI Act in the previous three years. Each SIF must carry its own brand and logo; the parent fund house’s name can appear only as “brought to you by” or “offered by”, and only for five years.
The ₹10 lakh rule, and what happens if you drop below it
The minimum is not ₹10 lakh per scheme. It is ₹10 lakh at the level of your PAN, across all the strategies of one SIF. Money you hold in the same fund house’s ordinary mutual funds does not count towards it. Accredited investors are exempt, and so are the mandatory investments fund houses make on behalf of their own designated employees.
Once you are above the line, SIPs, systematic withdrawals and systematic transfers are allowed, which some explainers still say is not the case. The catch is what happens when your holding falls below ₹10 lakh, and SEBI treats that very differently depending on why it fell.
| Situation | Holding after | SEBI treatment | What you can do |
|---|---|---|---|
| You invest ₹10,00,000; the NAV then falls 12% | ₹8,80,000 | Passive breach, not a violation | Stay invested, or redeem everything. Partial redemption is not allowed. |
| You hold ₹12,00,000 and redeem ₹2,00,000 | ₹10,00,000 | No breach | Nothing further needed |
| You hold ₹10,50,000 and redeem ₹1,00,000 | ₹9,50,000 | Active breach | All your SIF units are frozen and you get 30 days to top up |
| An active breach is not fixed within 30 days | : | Automatic redemption | Units are redeemed at the NAV of the next business day after day 30 |
| You hold ₹10,60,000 and withdraw ₹20,000 a month | After 3 withdrawals: ₹10,00,000 | A fourth would take you to ₹9,80,000 | Only three withdrawals fit before the line, if the NAV does not change |
Rules: SEBI SIF circular of 27 February 2025, para 4.1.4; SEBI circular of 29 July 2025, para 3. An active breach is one caused by a transaction you start: a redemption, a transfer or a sale on an exchange. Amounts are worked examples; the SWP row ignores NAV movement.
How a 25% short changes the arithmetic
The feature that separates a SIF from an ordinary fund is the right to hold up to a quarter of its assets in unhedged short positions, which gain when prices fall. What matters to an investor is not the gross position but the net one: long exposure minus short exposure.
SEBI’s circular includes its own example portfolio for a ₹100 crore equity long-short strategy: ₹70 crore in shares, ₹5 crore in cash and ₹25 crore of short positions through stock or index futures. Scaled to a ₹10 lakh investment, that is ₹7 lakh long, ₹50,000 in cash and ₹2.5 lakh short, for a net market exposure of 45%.
| Market move | Longs (₹7 lakh) | Shorts (₹2.5 lakh) | Long-short result | Fully invested ₹10 lakh |
|---|---|---|---|---|
| Falls 10% | −₹70,000 | +₹25,000 | −₹45,000 (−4.5%) | −₹1,00,000 (−10%) |
| Rises 10% | +₹70,000 | −₹25,000 | +₹45,000 (+4.5%) | +₹1,00,000 (+10%) |
Our calculation from the portfolio in Annexure A1 of SEBI's circular, scaled by 10 lakh / 100 crore. Assumes every long and short position moves exactly with the market; ignores costs, taxes and stock selection, which in practice decide most of a long-short fund's result.
The trade is symmetrical. The shorts that halve the loss in a falling market halve the gain in a rising one. A long-short strategy earns its fee only if the manager picks longs that beat the market and shorts that lag it; the structure alone does not do that.
Where ₹31,175 crore has gone
AMFI publishes a separate monthly report for SIFs. Its figures show a category that grew slowly for six months and then accelerated sharply from June 2026.
Source: AMFI SIF monthly reports, October 2025 to August 2026. October 2025 is the first month AMFI reports.
| Category | Strategies | Folios | Net inflow in August (₹ cr) | Assets (₹ cr) | Share of assets |
|---|---|---|---|---|---|
| Equity Long-Short | 11 | 23,556 | 593 | 3,450 | 11.1% |
| Equity Ex-Top 100 Long-Short | 7 | 42,902 | 2,433 | 6,289 | 20.2% |
| Sector Rotation Long-Short | 1 | 640 | 2 | 46 | 0.1% |
| Debt Long-Short and Sectoral Debt | 0 | ( | ) | : | 0% |
| Active Asset Allocator Long-Short | 3 | 9,404 | 558 | 1,721 | 5.5% |
| Hybrid Long-Short | 11 | 49,037 | 4,113 | 19,670 | 63.1% |
| Total | 33 | 1,25,539 | 7,699 | 31,175 | 100% |
Source: AMFI SIF monthly report for August 2026; shares are our calculation from AMFI's assets column. Eleven Hybrid Long-Short strategies means eleven different SIFs run one each, since each SIF may run only one per category.
AMFI’s numbers, read closely:
- Almost all of it is new money. Net inflows from October 2025 to August 2026 add up to ₹30,028 crore, 96.3% of the ₹31,175 crore now held. The remaining ₹1,148 crore is the difference between assets and cumulative net inflows, which mostly reflects market movement.
- Hybrid is the product people are buying. Hybrid long-short strategies hold 63.1% of all SIF assets, and hybrid strategies as a group 68.6%. No debt strategy had launched by the end of August 2026.
- The average holding is well above the minimum. ₹31,175 crore across 1,25,539 folios is about ₹24.8 lakh per folio. A folio is an account with one fund house, not a person, so this is an average per account rather than per investor.
Tax, distribution and the warning SEBI makes every SIF print
Because each strategy is a mutual fund scheme, investors are taxed on their units as mutual fund investors, not on every trade the manager makes, as they would be in a PMS. An equity-oriented strategy is taxed like an equity mutual fund: 20% on gains from units held up to 12 months, and 12.5% on long-term gains above ₹1.25 lakh a year. Whether a particular hybrid or long-short strategy counts as equity-oriented for tax depends on its portfolio, and the ISID is the place to check.
Only distributors who have passed NISM’s Series-XIII Common Derivatives Certification exam may sell SIFs. Each strategy carries a “risk-band” from level 1 (lowest) to level 5 (highest), reviewed every month, and must disclose its full portfolio every two months. Units of interval and close-ended strategies must be listed on an exchange to give investors an exit.
Every advertisement must also carry a disclaimer whose wording SEBI fixed, with no words added or removed: “Investments in Specialized Investment Fund involves relatively higher risk including potential loss of capital, liquidity risk and market volatility. Please read all investment strategy related documents carefully before making the investment decision.”
What some explainers get wrong
Checked against SEBI’s circulars, three claims that circulate widely do not hold up.
- “SIFs are regulated as Category III AIFs.” They are not. They sit in Chapter VI-C of the SEBI (Mutual Funds) Regulations, 1996, and the SIF circular is issued under that chapter.
- “There is no SIP option; it is lump sum only.” Para 4.1.3 of the February 2025 circular allows SIPs, SWPs and STPs, provided the ₹10 lakh threshold is kept.
- “SEBI allows six strategies.” The circular lists seven: three equity, two debt and two hybrid.
A ₹10 lakh ticket into a year-old category
The rules are clear and the demand is real: 1,25,539 folios and ₹7,699 crore of net new money in August alone. What does not exist yet is a track record. AMFI’s first SIF report covers October 2025, so no SIF has been through a full market cycle, and the long-short promise, that the structure cushions falls, has not been tested by a sustained downturn in this category.
For someone with ₹10 lakh or more to commit, a specialised investment fund is a legitimate option to weigh against a PMS or a large mutual fund holding, not a replacement for either. Read the ISID for the redemption frequency and notice period, check the risk-band, keep your total across the SIF clear of the ₹10 lakh line, and judge any manager on the returns they publish from here on rather than the promise of the category.
This guide explains SEBI’s published rules and AMFI’s published data. It does not recommend any product; speak to a SEBI-registered investment adviser about your own situation.
Frequently asked
- What is a specialised investment fund (SIF)?
- A SIF is a set of investment strategies run by a mutual fund house under the SEBI (Mutual Funds) Regulations, 1996, with a separate brand. Each strategy can take unhedged short positions of up to 25% of net assets, and investors must put in at least ₹10 lakh across the SIF.
- What is the minimum investment in a SIF?
- ₹10 lakh at PAN level, counted across all strategies of the same SIF. Investments in the fund house’s ordinary mutual funds do not count. Accredited investors are exempt.
- Can I do a SIP in a SIF?
- Yes. SEBI’s February 2025 circular allows SIPs, SWPs and STPs, as long as your total across the SIF stays at or above ₹10 lakh.
- What happens if my SIF investment falls below ₹10 lakh?
- If a fall in NAV causes it, that is a passive breach and not a violation, but you can then only redeem your whole holding. If your own redemption, sale or transfer causes it, your SIF units are frozen and you get 30 days to top up; otherwise they are redeemed automatically.
- How big is the SIF market?
- AMFI data show ₹31,175 crore of assets across 33 strategies and 1,25,539 folios at the end of August 2026, up from ₹2,010 crore across four strategies in October 2025.
