Presenting Specialised Investment Funds launched by the
Securities and Exchange Board of India: New Frontier in Asset Management
SEBI has come out with a new investment product that bridges
the gap between traditional mutual funds and portfolio management services
(PMS). With the minimum investment threshold being ₹10 lakh, the new asset
class brings to investors advanced and diverse investment strategies.
What are Specialised Investment Funds?
SIFs are designed to cater to sophisticated investors looking for an edge in asset management. These funds provide access to diverse investment strategies, including:
- Equity
- Debt securities
- Real Estate Investment Trusts (REITs)
- Derivatives like Futures & Options (F&O)
Each SIF will offer a unique combination of risk and return
depending on the strategy chosen by the
Asset Management Company (AMC).
Why Introduce SIFs?
Demand for products offering advanced strategies with low entry barriers has been there for a long time. While mutual funds are available to retail investors, they are generally not as sophisticated as PMS offerings. In contrast, PMS is not accessible to most due to the minimum investment threshold of ₹50 lakh.
SIFs fill this gap by providing advanced investment
strategies at a relatively lower threshold of ₹10 lakh, allowing more investors
to participate in professional-grade asset management.
Key Features of SIFs:
1. Structured Like Mutual Funds
SIFs will operate under a mutual fund framework, offering:
- Seamless investment and redemption procedures.
- Tax treatment similar to mutual funds.
2. Diverse Investment Strategies
Fund managers can pursue bold strategies, including derivative-based tactics or diversified asset exposure, depending on market conditions.
3. Investor Safeguards
To protect investor interests, SEBI has introduced the following restrictions:
- Maximum 10% investment in any single listed company.
- Maximum 20% exposure to any debt issuer (except Government
Securities (G-Secs) and Treasury Bills (T-Bills)).
4. Certified Fund Managers
All fund managers managing SIFs must be certified by the
National Institute of Securities Market (NISM), ensuring professional
expertise.
5. Fee Structure Compliance
The fees for SIFs will adhere to Regulation 52 of the mutual
fund regulations, making the cost structure transparent and investor-friendly.
How SIFs Differ from PMS
Specialized Investment Funds (SIFs) and Portfolio Management
Services (PMS) cater to distinct investor needs, but the introduction of SIFs
brings several differences worth highlighting:
1. Minimum Investment:
SIFs require a minimum investment of ₹10 lakh, making them more accessible compared to PMS, which demands a significantly higher threshold of ₹50 lakh.
2. Portfolio Management Style:
SIFs operate as pooled investments, similar to mutual funds, where all investors share the same portfolio. In contrast, PMS provides individualized portfolios tailored to each investor's goals and risk profile.
3. Tax Treatment:
SIFs follow the same tax treatment as mutual funds, ensuring uniformity across all investors. PMS, on the other hand, calculates taxes at the individual portfolio level, which can be more complex.
4. Complexity:
While SIFs offer advanced strategies, they remain moderately complex and accessible to a wider audience. PMS products, however, are highly sophisticated and cater to high-net-worth individuals seeking bespoke solutions.
5. Accessibility:
SIFs aim to bridge the gap between mutual funds and PMS by
offering advanced strategies at a lower entry point, making them suitable for a
broader range of investors. PMS, with its high minimum investment and
customized approach, remains niche and exclusive.
Exposure to high-risk, high-return strategies:
- Access to professional-grade asset management at a lower
threshold.
- The flexibility and simplicity of a mutual fund-like
structure.
Conclusion
SEBI’s move to introduce Specialized Investment Funds is a significant milestone in India's asset management landscape. By combining the sophistication of PMS with the accessibility of mutual funds, SIFs are poised to attract a diverse pool of investors. Whether you are an experienced investor seeking advanced strategies or someone looking to diversify your portfolio, SIFs offer a promising avenue.
As these funds roll out, they are likely to redefine
investment strategies and reshape how Indian investors approach asset
management.
