The Securities and Exchange Board of India (SEBI) has issued FAQs providing operational and compliance-related guidance on Specialized Investment Funds (SIFs) for mutual funds, Asset Management Companies (AMCs), intermediaries, and distributors.
The following has been stated:
Establishment and branding: Registered mutual funds may establish SIFs subject to prescribed eligibility criteria. SIFs must have a separate brand name and logo, approved by the AMC Board, Trustee Company and SEBI, along with a dedicated website or webpage.
Fund management requirements: Under the Alternate Route, an SIF must have a CIO with at least 10 years of fund-management experience and ₹5,000 crore average AUM, along with a Fund Manager having at least three years' experience and ₹500 crore average AUM. Each SIF investment strategy also requires trustee approval and SEBI's final observations.
Investment and derivatives: SIF strategies may undertake complex derivative strategies, including hedged and unhedged positions. Unhedged short exposure is generally subject to a 25% limit, with specific restrictions depending on the strategy. Calendar spreads are treated as hedged positions, while offsetting is permitted only where the underlying security and expiry are the same.
Redemption and liquidity: An AMC may prescribe a redemption notice period depending on the strategy's structure and liquidity profile. Equity-oriented strategies may offer daily or lower-frequency redemptions, debt strategies at least once a week or less frequently, and hybrid strategies at least twice a week or less frequently.
Risk and disclosures: SIF investment strategies must assign and periodically review their Risk-band. Portfolio disclosures, including derivative positions, are required every alternate month and must be published on the AMC and AMFI websites within 10 calendar days of the relevant month-end.
Distributor requirements: Distributors must obtain NISM Series V-D – Mutual Fund – Specialized Investment Fund Distributors Certification and hold a valid ARN to distribute SIF products. Existing NISM Series XIII certificate holders may continue until expiry, subject to the specified transitional requirements.
Investor communication: Distributors should clearly explain the SIF's higher-risk nature, ₹10 lakh PAN-level threshold, consequences of active/passive breach, investment strategy, derivatives exposure, Risk-band, redemption terms, liquidity provisions, fees, expenses and exit load, where applicable.
