Mutual Funds: SEBI Introduces Regulatory Framework for Specialized Investment Funds (SIFs)

This framework seeks to fill gaps between mutual funds (MFs) and portfolio management services (PMS), which allows sophisticated investors more flexibility with their investments while still being held to regulations.

- 

The Securities and Exchange Board of India ("SEBI") published a consultation paper on draft securities market regulation for Specialized Investment Funds ("SIFs"), with an expected effective date of April 1, 2025. This framework seeks to fill gaps between mutual funds (MFs) and portfolio management services (PMS), which allows sophisticated investors more flexibility with their investments while still being held to regulations.

Eligibility Criteria for SIFs

A SEBI-registered mutual fund can set up a SIF by fulfilling certain conditions via either of the two) routes:

■ Route 1: The USP of the mutual fund must be at least three years old in the market and an average AUM of Rs. 10,000 crore in the last three years. Besides, over the last three years, no action on the regulatory front should have been initiated against the sponsor or asset management company under the provisions of the SEBI Act.

■ Route 2 (Alternate Route): AMC will have to appoint a Chief Investment Officer (CIO) with 10 years of prior experience managing Rs. 5,000 crores along with a fund manager having a minimum of three years of experience managing Rs. 500 crores. As in Route 1, no member of the sponsor or AMC should have taken regulatory action during the last 3 years.

Investment and Restrictions

■ The minimum investment in SIFs is Rs. 10 lakh per investor, which has to be maintained on a PAN-wise basis across all investment strategies. This limit is applicable only for SIF investments and does not include normal MF schemes of the same AMC. This requirement does not apply to accredited investors.