Specialised Investment Funds: How They Differ From Mutual Funds, PMS, and AIFs

Image Source : Mint

The Securities and Exchange Board of India (SEBI) has introduced the Specialised Investment Fund (SIF) framework to bridge the gap between mutual funds and portfolio management services. Designed for sophisticated investors, SIFs offer greater flexibility while maintaining regulatory oversight.

Key Highlights

- SIFs provide a structured investment avenue for high-net-worth individuals, with a minimum investment threshold of ₹10 lakh per investor.
- Unlike mutual funds, which pool money from multiple investors into diversified portfolios, SIFs allow for more tailored investment strategies.
- PMS requires a minimum investment of ₹50 lakh and offers personalized portfolio management, whereas AIFs cater to investors with a minimum entry limit of ₹1 crore.
- SIFs can offer Systematic Investment Plans (SIP) and Systematic Withdrawal Plans (SWP) but must comply with the minimum threshold amount.

Structure and Regulation

- Mutual funds are highly regulated by SEBI, ensuring transparency, liquidity, and diversification, making them suitable for retail investors.
- PMS provides customized portfolio management for wealthy investors, where fund managers directly manage individual portfolios.
- AIFs are pooled investment vehicles categorized into high-risk, moderate-risk, and lower-risk funds, primarily targeting institutional investors and high-net-worth individuals.
- SIFs introduce a new investment structure that combines elements of mutual funds and PMS, offering a unique strategy for sophisticated investors.

Investment Flexibility and Strategy

- Mutual funds follow standardized asset allocation models and primarily invest in listed instruments.
- PMS allows fund managers to tailor portfolios based on individual risk profiles and financial goals.
- AIFs invest in non-traditional assets such as real estate, hedge funds, and private equity, providing exposure to high-risk opportunities.
- SIFs aim to provide a middle ground, offering structured investment strategies with regulatory oversight while allowing for greater flexibility than mutual funds.

Industry Perspective

Experts believe that SIFs could disrupt the investment landscape by attracting mass affluent investors who seek more than traditional mutual fund products but do not meet the high entry barriers of PMS and AIFs. SEBI’s broader reform agenda may further blur the boundaries between these investment vehicles, creating a more integrated asset management framework.

With the introduction of SIFs, investors now have an additional option that balances flexibility, regulatory compliance, and strategic investment opportunities, making it a compelling choice for those looking beyond conventional mutual funds.

Sources: Economic Times, MSN, Moneycontrol, Bajaj Finserv, IME Capital