AIFs and Wealth Managers Rush for Mutual Fund Licences as SEBI’s SIF Push Redraws Investment Landscape

Wealth management companies and Alternative Investment Funds (AIFs) are running for mutual fund licences after the Securities and Exchange Board of India's (SEBI) introduction of Specialized Investment Funds (SIFs)—a new asset class for filling the gap between mutual funds and portfolio management services (PMS). The new SIF regime from April 1, 2025, is more flexible and has broader investment strategy options, leading industry players to make a beeline for licence applications in anticipation of early-mover advantage.

 

Key Highlights:

 

•⁠  ⁠SIFs Explained: SIFs possess the regulatory intensity of mutual funds and the flexibility of PMS, with varied strategies—equity, debt, and hybrid—falling under one fund framework. Minimum investment is ₹10 lakh, with higher risk and return potential than normal mutual funds.

 

•⁠  ⁠Eligibility and Composition: SIFs can be given only by SEBI-registered mutual funds with strict AUM and compliance norms, or they must appoint highly experienced fund managers if they choose to go the second way.

 

•⁠  ⁠Market Effect: SIFs allow for as much as 25% derivative exposure and a wider asset universe, attracting AIFs and wealth managers who wish to offer sophisticated products to high-net-worth clients.

 

•⁠  ⁠Transparency and Compliance: SIFs must adhere to mutual fund-like taxation rules, disclose the portfolios and risks regularly, and possess stringent redemption processes and risk banding.

 

Prospects: As SEBI's SIF regime gains momentum, anticipate more AIFs and wealth managers shifting to mutual fund licences, putting pressure on competition and innovation in India's alternative investment space. There will be more investors who will gain from a broader, freer range of funds—though increased minimums and risk profiles guarantee SIFs will focus on the high-net-worth and sophisticated investor segment.

 

Source: SEBI, Groww, CNBC TV18, Outlook Money