The New Frontier for Advanced Investors: Part 2
Read More on What are Specialized Investment Funds and its advantage in the Indian context?
AIFs vs SIFs vs Traditional Mutual Funds
Mutual funds are the simplest set of pooled investment vehicles that SEBI stringently controls and regulates, offering exposure to a broader set of asset classes such as equity, debt, and hybrid funds, with entry barriers as low as Rs. 500 to start an SIP.
Portfolio Management Services (PMS) invest in personalized strategies, with a minimum ticket size of Rs. 50 lakh. They focus on bespoke asset allocation and are actively managed by fund managers. Unlike mutual funds, where investments aren’t pooled with others, you get exclusive strategies and more control over your money.
AIFs are also pooled investment vehicles that invest in less-regulated, non-traditional asset classes like private equity, structured debt, real estate, and hedge funds. AIFs operate within lower regulatory oversight and the freedom to explore a wide range of conventionally niche assets with less liquidity due to lock-ins. With a minimum investment of Rs. 1 crore, AIFs are only accessible to HNIs and institutional investors.
SIFs follow SEBI regulations for liquidity and diversification. Minimum investment threshold for SIFs is Rs. 10 lakh, with moderate liquidity options (open-ended, close-ended, or interval-based). However, SIFs can operate only in one strategy per fund (equity, debt, or hybrid), preventing over-diversification that may dilute returns.
How can Mutual Fund Distributors (MFDs) qualify to distribute SIFs?
The recent AMFI guidelines (July 30, 2025), codified via SEBI’s July 2025 circular, specify strict requirements for Mutual Fund Distributors (MFDs) who wish to offer SIFs:
- Eligibility: Must hold a valid ARN (AMFI Registration Number) or EUIN (Employee Unique Identification Number).
- Certification: MFDs and their employees must clear the NISM Series-XIII: Common Derivatives Certification Examination, a test covering derivatives markets, strategies, and regulation.
- Registration: Eligible distributors must register specifically with AMFI for SIF distribution. Non-individual entities must ensure that at least one qualified employee (EUIN holder) is certified and registered under their ARN.
- Fees & Validity: SIF registration and renewal fees mirror those for ARN, and validity is co-terminous with NISM XIII certification for individuals; three years for entities. Invalid ARN/EUIN results in automatic suspension of SIF registration (until renewal).
Why Should MFDs Promote SIFs to Investors?
1. Addressing Portfolio Sophistication: SIFs allow MFDs to serve HNIs and sophisticated investors, with products that match global investment sophistication. This enables them to retain and grow AUM from clients who may otherwise shift to PMS or alternate channels.
2. Competitive Differentiation: As SIFs can only be distributed by qualified and certified MFDs, this creates an opportunity for distributors to distinguish themselves as “premium” in a crowded marketplace.
3. Broader Solutions for Investor Needs: Many investors today seek niche products and are willing to bear higher risk for higher returns and sector-specific exposure, but with relatively lower entry barriers.
SIFs allow MFDs to offer comprehensive solutions across the risk-return spectrum, thus remaining relevant and trusted for both portfolio diversification and growth. Moreover, redemption options are flexible and can be great for long-term planning.
4. Transparency and Regulatory Comfort: By distributing a SEBI-regulated product with clear guidelines, risk disclosures, and transparency in operations, MFDs can instill greater trust with clients who are wary of unregulated “alternative” investments.
The launch of SIFs marks a significant milestone for India’s evolving financial markets. For investors ready to embrace higher risks for the prospect of superior returns and access to sophisticated strategies, SIFs offer a regulated, innovative alternative. For MFDs, acquiring the right certifications and expertise to distribute SIFs is not just a growth opportunity; it’s a necessary step to stay relevant, competitive, and agile in the era of advanced, investor-centric finance.