Investors can begin investing in mutual funds with as little as Rs 100.
Specialised Investment Funds (SIFs) launched by mutual fund houses have crossed Rs 10,000 crore in assets under management (AUM).
Fund houses began launching them in late August 2025. Twenty funds are available currently.
Key Points
- SIFs allow sophisticated strategies including unhedged short exposure, long-short investing and dynamic multi-asset allocation approaches.
- Experts warned that execution risks, liquidity concerns and directional losses could significantly impact investor returns in SIFs.
- Several SIF categories offer varying risk profiles ranging from low-risk arbitrage structures to aggressive equity long-short strategies.
- Financial advisers recommend limiting SIF exposure to 10 to 15 per cent of total portfolio allocations for most investors.
SIF Investment Rules Explained
Fund managers may take up to 25 per cent unhedged short exposure in these funds.
Investors can begin investing in mutual funds with as little as Rs 100.
"SIFs require a minimum investment of Rs 10 lakh per investor at the permanent account number (PAN) level across all SIF strategies under one asset management company," says Manish Gadhvi, CEO, FundsIndia B2B.
Long-Short Strategy Risks
A long-short strategy can provide a hedge during bear markets. These funds can perform in both rising and falling markets.
In a long-only strategy, the downside is capped at the value of what the investor owns.
"In a long-short fund, losses can be significant and quick if a shorted stock rises instead of falling," says Gadhvi.
Abhishek Kumar, Sebi-registered investment adviser and founder, SahajMoney.com adds that losses can be double-sided if long positions fall while short positions rise.
"Complexity does not automatically mean superior returns," says Manuj Jain, cofounder, ValueMetrics Technologies, which provides valuation-based analysis across asset classes.
Liquidity And Execution Concerns
Investors may not be able to exit these funds quickly.
Many SIFs are interval funds in which investors cannot exit on demand. Execution risk is high.
"The outcome depends heavily on the fund manager's ability to call long and short positions correctly," says Gadhvi.
Investors are also subject to threshold-compliance risk.
An AMC may mandate full exit if an investor's investments fall below Rs 10 lakh.
These funds also lack a comprehensive track record.
Risk varies by strategy. Some SIF strategies carry lower risk than others.
Debt-and-arbitrage SIFs with zero net equity exposure, debt-oriented long-short funds, and hybrid active asset allocators are relatively low-risk.
"All market-neutral approaches would be lower risk," says Chinmay Sathe, chief investment officer-SIF, The Wealth Company Mutual Funds.
Pure-equity long-short SIFs sit at the higher end of the risk spectrum.
"Directional long-short or thematic concentrated strategies can carry relatively higher risk," says Sathe.
Jain adds that directional long-short exposure in ex-top 100 stocks may also be riskier.
Major categories
Mutual fund analytics platform Value Research has categorised the SIFs launched so far into four categories.
SIF Equity Long-Short: These funds must invest at least 80 per cent in equity instruments.
"They seek to offer better risk-adjusted returns through partial market hedges and short positions," says Gaurav Kulshrestha, CIO, Nexedge Capital.
Investors seeking aggressive hedge-fund-like strategies may consider them.
SIF Ex-Top 100: These funds must invest at least 65 per cent in ex-top 100 stocks, basically mid- and smallcaps.
These funds provide access to alpha-rich segments beyond largecaps.
However, this strategy carries higher volatility risk.
"Execution challenges are greater in shorting less liquid names," says Kulshrestha.
These funds are for investors with a higher risk appetite and a longer horizon.
SIF Hybrid Long-Short: These funds combine equity long-short strategies with fixed-income and arbitrage positions.
Funds must have a minimum 25 per cent exposure to each: Equity and debt.
Multi-asset exposure can translate into lower volatility.
However, these funds could underperform in strong bull markets.
Investors seeking stability with moderate growth may consider them.
SIF Active Asset Allocator Long-Short: These funds can allocate across equity, debt, real estate investment trusts (Reits), infrastructure investment trusts (Invits), and commodities.
They offer multi-asset diversification and dynamic allocation and are well-suited for navigating different macro regimes.
"Their performance is dependent on asset allocation decisions," says Kulshrestha.
Investors looking for an actively managed all-weather portfolio may consider them.
Checks to run
Examine the investment strategy information document (ISID) to understand a fund's strategy.
A fund may be labelled long-short, but the fund manager may effectively run a long-only portfolio, as Sebi has not set a minimum limit on short exposure.
Jain adds that investors should also understand whether derivatives are being used for hedging or to take aggressive directional bets.
They must also assess the fund manager's experience in managing short-selling strategies.
What should you do?
Choose the right strategy.
"Select a product that aligns with your risk appetite and objective," says Jain.
Invest with at least a three-year horizon.
"Treat SIFs as portfolio diversifiers rather than as replacements for core investments," says Sathe.
Kumar adds that investors should limit allocation to 10-15 per cent of the total portfolio.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff
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