SIFs decoded: The beginning of the month often marks key financial activities such as salary credits, bill payments, and planning expenses. But just as we
plan for our expenses, it’s equally important to plan for our investments. To encourage this habit, SBI Mutual Fund, in collaboration with Times Network, is launching a nationwide investor awareness initiative: Bharat Nivesh. The objective of this initiative is to promote the habit of consistent investing among Indians, helping them secure their financial future. As part of the campaign, we are observing the fourth of every month as a reminder to start your mutual fund SIPs or ensure your existing SIP continues. So go on, set your reminder to invest consistently and stay committed to your financial goals and the well-being of your loved ones. Today, in a special segment of The Money Show by ET Now, they discussed about the Specialised Investment Funds, or SIFs. Let’s elaborate more on this with the insights of an expert, Hemant Rustagi. Let’s understand this category and get clarity on whether it is the right investment for you.
Specialised Investment Funds: Review
This is a much-talked-about category, SIFs ( Specialised Investment Funds). Let’s decode it. Even retail investors who want to invest slightly higher amounts can be interested in it. But what exactly is it, and what does it entail?
The expert, Hemant Rustagi, says, This is a new option, especially for mutual fund investors who have already built their portfolios and are looking at different strategies to add to them. This product is meant for them.
Earlier, we had mutual funds on one hand and PMS (Portfolio Management Services) on the other. But the minimum investment for PMS is Rs 50 lakh, and for AIF (Alternative Investment Fund) is Rs 1 crore. Obviously, not everyone could invest in those due to the high minimum amounts.
What is SIF?
Some investors experimented with derivatives, futures, and options, but faced losses. To address this, SEBI introduced SIF (Specialised Investment Fund), giving investors a chance to access these strategies under the guidance of professional fund managers
In simple terms, SIF allows you to invest in different strategies. There are three categories of SIF: equity-oriented, debt-oriented, and hybrid-oriented. SEBI has allowed fund houses to employ seven different strategies across these three categories. So, if someone wants to diversify beyond a traditional long-only mutual fund, they can consider SIF as an investment option.
Should SIF be at heart of your portfolio or just an extra?
According the the expert, clearly, these are complex strategies. When we talk about long-short strategies, derivatives are involved, which not every investor is familiar with. If you are building your mutual fund portfolio, your mutual fund portfolio should remain your core investment.
However, if you have a sizable portfolio, several years of mutual fund experience, and are looking to diversify your investment options, SIF could be worth considering, provided you have a good understanding of complex strategies such as calendar spreads, strangles, and other derivative techniques
SIF investment costs explained: What investors should know?
According to the expert, the recent rationalisation of fund charges hasn’t affected SIF. Charges are not prohibited and are reasonable. For a product allowing such strategies, it’s still accessible.
From a performance perspective, SIFs can be slightly technical. Unlike regular mutual funds, you may need to understand them from a fund manager’s perspective before analysing returns.
SIF Performance: key factors to check before investing
Since the Specialised Investment Fund is new, there’s no historical performance data. The main factor is whether you have a reasonably large portfolio and sufficient risk appetite.
These funds can use derivatives not just to manage risk, but to generate returns, unlike long-only mutual funds. If your goal is to diversify strategies in your portfolio, this is the stage to consider SIF.
Compared to PMS, the Specialised Investment Fund has advantages like lower minimum investment and tax efficiency; you pay taxes only on transactions, not during the investment period. Essentially, SIF sits between PMS/AIF and mutual funds, offering multi-asset and derivative-based strategies.
SIF Spotlight: Why are most early funds hybrid?
Hybrid SIFs allow multi-asset strategies: equity, debt, derivatives, and even commodities like gold and silver REITs. This gives investors a diversified portfolio with the potential for higher returns using derivatives, says the expert, Hemant Rustogi.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
