In a move aimed at reducing the regulatory arbitrage between mutual funds and Portfolio Management Services (PMS), SEBI has approved the creation of a new asset class that allows mutual fund houses to offer sophisticated investment strategies with a minimum investment of 10 lakh rupees. This bridges the gap between the current mutual fund minimum of 500 rupees and the PMS minimum of 50 lakh.
What the New Category Offers
The new asset class, tentatively called "Specialised Investment Funds" (SIF), will allow AMCs to offer strategies currently restricted to PMS and AIF structures. These include long-short equity strategies, concentrated portfolios with fewer than 20 stocks, sector-specific opportunistic funds, and inverse or leveraged strategies. The products will be offered as pooled vehicles (similar to mutual funds) but with relaxed diversification norms.
The 10 lakh minimum threshold is designed to restrict access to investors with a reasonable risk appetite and financial sophistication, while being significantly more accessible than PMS (50 lakh) or AIFs (1 crore). SEBI expects this to channel approximately 2-3 lakh crore currently invested in unregulated or loosely regulated schemes into a properly regulated framework.
How It Differs from Mutual Funds
Unlike traditional mutual funds, SIFs can hold up to 35% of their portfolio in a single stock (vs 10% for MFs), use derivatives for both hedging and directional positions, maintain cash positions up to 50% of the portfolio, and charge performance-linked fees in addition to management fees. The total expense ratio cap for SIFs will be 2.5% for equity strategies and 1.5% for debt strategies, plus a performance fee of up to 20% above a hurdle rate of 8%.
SIFs will also have different liquidity terms, with redemption processing taking up to 15 working days (vs 3 days for equity mutual funds). This longer settlement period allows fund managers to manage concentrated positions without being forced into fire sales during redemption pressure.
Should You Consider SIFs?
SIFs are designed for investors who have already built a diversified mutual fund portfolio and seek satellite allocations to higher-conviction strategies. If you have less than 50 lakh in total investments, your core portfolio of diversified equity mutual funds, PPF, and NPS should take priority. SIFs are not a replacement for foundational investing; they are an addition for those seeking potentially higher returns with commensurately higher risk.
Source
SEBI Board Meeting Minutes, January 2026