Specialised Investment Funds (SIF): What They Are and What Makes Them Different

Before SIF, Indian investors had three main options along the flexibility and minimum-investment spectrum:

• Mutual funds: accessible from Rs 100 (SIP), defined investment strategies, no short selling, no derivatives for return enhancement

• PMS: minimum Rs 50 lakh, high flexibility, fully customisable portfolios, bespoke management

• AIFs: minimum Rs 1 crore, complex structures, limited to sophisticated institutional or HNI investors

SIF fills the Rs 10 lakh to Rs 50 lakh range with regulated strategies that go beyond what a traditional mutual fund can do.

Equity-oriented strategies
May include long-short equity, where the fund holds long positions in stocks it expects to rise and short positions in stocks it expects to fall. This differs fundamentally from a long-only mutual fund. Short positions can generate returns in falling markets but also amplify losses if the short call is wrong.

Debt-oriented strategies
May include active duration management beyond what a typical debt mutual fund does, and credit-based allocation that takes more concentrated or flexible positions in the credit cycle.

Hybrid strategies
Combine equity and debt with dynamic allocation and the ability to take unhedged short exposure up to 25% of the portfolio through derivatives. This 25% short exposure is a structural feature that does not exist in mutual funds and significantly increases the range of possible outcomes, both favourable and unfavourable.

Strategy risk from derivatives and short positions
A long-only mutual fund can lose only what it invested. A fund with short positions and derivatives can behave very differently from a traditional portfolio. A wrong directional call on a short position or an adverse derivatives move can amplify losses in ways that a buy-and-hold equity fund cannot. This is not theoretical. It is a structural feature of the strategy and must be understood before investing.

Liquidity constraints
Not all SIF structures offer daily liquidity. Some are interval-based, meaning redemptions are only permitted during specified windows. An investor who needs to exit outside a redemption window cannot do so. This is a material difference from a mutual fund, where redemption is typically available on any business day.

Limited track record
SIF was introduced in 2025. There is no 5-year or 10-year performance record to evaluate. Investors are assessing strategies based on the framework design and the manager's track record in other contexts, not on demonstrated SIF-specific outcomes.

Fee structure
Performance-linked fees mean costs are higher in years when the fund performs well. This is not inherently negative, as it aligns manager incentives with investor outcomes. But it can mean total costs in a strong year are meaningfully higher than a flat-fee mutual fund.

SIF is not appropriate for all investors. It may be relevant for those who: have a minimum investible surplus of Rs 10 lakh beyond emergency and near-term needs; are already comfortable with equity market-linked investing and understand what leverage and short positions mean; are looking for strategies that can potentially behave differently from long-only equity or debt funds; and can accept the possibility of outcomes that are more variable than traditional mutual fund categories.

The suitability of any specific SIF depends on the individual investor's risk profile, financial goals, and investment horizon.

DSP operates within the SIF framework through its Endurance SIF. Details on the strategy, structure, and applicable terms are available at dspim.com/endurance-sif.