SIFS: A New Asset Class for Tax Breaks, Better Returns and Clearer Goals

SIFs provide tax relief, MF-like oversight, risk management by professionals & diversification

- Nalin Moniz

Funds that follow alternative strategies in the listed markets have exploded in popularity since the introduction of alternative investment fund regulations. Category III AIFs—a new idea in 2012—have garnered ₹2.17 trillion of commitments as of today. Discretionary portfolio managers have grown by ₹4.26 trillion since then. Even mutual fund investors have discovered the power of risk-adjusted returns through categories such as balanced advantage funds (₹2.9 trillion of assets under management) and multi-asset funds (₹4.33 trillion of AUM).

The Securities and Exchange Board of India recently notified a new asset class: specialized investment fund (SIF), which, with a minimum ₹10 lakh investment, sits between mutual funds and portfolio management services. And I’m just as optimistic about this new asset class as I was when I created the first AIF in 2012.

Both existing MFs with ₹10,000 crore of AUM and three years of track record and specialized investment managers can start launching SIFs from 1 April. So here’s some crystal-ball gazing on potential products and what they can do for your portfolio. My top idea is the return of structured products via SIFs. These funds could offer periodic subscriptions and redemptions, capital protection, and, as on date, 30-70% of the upside of the Nifty.

Psychological comfort