Distributor-FAQ – SEBI’s Specialised Investment Funds (SIF)


Distributors holding a valid SIF certification (NISM XIII - Common Derivatives Certification Examination) along with an active EUIN are eligible to sell Specialised Investment Funds (SIFs).

 

1. Why should distributors care about SIFs?

Because SIFs:

  • Offer differentiated strategies (long-short, thematic, alpha-generating).
  • Provide portfolio diversification beyond vanilla mutual funds.
  • Have a lower entry barrier (₹10L minimum) compared to PMS (₹50L+) or AIFs (₹1 Cr+).
  • Come with SEBI oversight and mutual fund-like transparency.
  • Allow systematic investments and redemptions (unlike PMS/AIFs).

Great product for HNIs/UHNIs seeking alpha but hesitant to enter PMS or AIF.


2. How are SIFs structured for distributors to recommend?

  • Available through regular (distributor) plan and direct plans (depending on AMC).
  • Units are held in demat form or statement of account (SOA) like mutual funds.
  • Can be transacted via RTA platforms-, MFU, or AMC platforms (subject to launch readiness).


3. What strategies can a SIF adopt?


AMCs can offer:

  • Equity Long-Short
  • Debt Long-Short
  • Sector Rotation
  • Hybrid Models
  • Event-driven or Thematic Strategies


4. Can clients do SIP, STP, or SWP in SIFs?


Yes, subject to minimum investment conditions:

  • SIP/STP/SWP is allowed, but ₹10L minimum must be maintained across SIF holdings.
  • If a client's investment falls below ₹10L (due to NAV fall or redemption), the AMC may force redeem the remaining amount.

 

5. What are key risks distributors should communicate?

  • Complexity: Use of derivatives, short-selling, etc.
  • Volatility: Potential for higher ups and downs.
  • Liquidity: Some SIFs may be closed-ended or interval (limited exit points).
  • Client Suitability: Not for low-risk investors or beginners.
  • Redemption Risk: Falling below ₹10L minimum may trigger full redemption.


6. What is the distributors due diligence responsibility?

  • Ensure the investor understands the strategy and associated risks.
  • Verify that the client meets the ₹10L investment criteria.
  • Document risk profiling and suitability (especially for derivative-heavy strategies).
  • Disclose that this is not a conventional mutual fund; it’s higher risk.


7. What kind of clients can you pitch SIFs to?

  • HNIs/UHNIs comfortable with PMS/AIF structures, but want mutual fund-style flexibility.
  • Clients bored of traditional MFs, seeking tactical or alpha-generating strategies.
  • Clients looking for regulated, SEBI-monitored alternatives to PMS/AIF. 


8. How can I track and manage SIF investments for clients?

  • Through the AMC’s platform, or if listed, via Account statements.
  • Some may integrate with RTA platforms (CAMS/KFin).
  • Portfolio performance and NAV will be disclosed monthly or as per SEBI norms.


9. How are commissions/trail paid on SIFs?

  • AMCs may offer regular trail commissions, but exact structure will vary.
  • Trail structure likely to be closer to AIF/PMS distribution, with upfront disallowed.
  • Distributors must disclose commission as per SEBI’s latest MF distribution norms.


10. Are there SEBI compliance rules for recommending SIFs?


Yes:

  • Ensure no mis-selling.
  • Maintain proper KYC & risk profile records.
  • No assured returns or capital guarantees allowed.
  • Distributors must fully disclose the nature, fees, and risks.


 

Minimum threshold requirement and consequences of non- maintenance: 

The AMC shall ensure that an aggregate investment by an investor across all investment strategies offered by the SIF, at the Permanent Account Number (‘PAN’) level, is not less than INR 10 lakh. Provided that the requirement of minimum investment amount shall not apply to an accredited investor. Provided that, the above provisions shall not be applicable for mandatory investments made by AMC for designated employees under paragraph 6.10 of the Master Circular for Mutual Funds dated June 27, 2024. The AMC shall monitor compliance with the Minimum Investment Threshold on a daily basis and ensure that there are no active breaches. The AMC shall ensure that the investor's total investment value does not fall below the Minimum Investment Threshold due to redemption transactions initiated by the investor.

Passive breaches (occurrence of instances not arising out of omission and commission by AMC), such as those caused by a decline in Net Asset Value (NAV), shall not be treated as a violation of the Minimum Investment Threshold. However, if the total investment value falls below the threshold due to a passive breach, the investor shall only be permitted to redeem the entire remaining investment amount from the SIF.

 Active Breaches shall mean fall in the aggregate value of an investor’s total investment across all investment strategies of SIF, below the Minimum Investment Threshold of INR 10 lakh, on account of any transactions (i.e. redemption, transfer, sale etc.) initiated by the investor. 

In case of any active breach of the Minimum Investment Threshold by an investor including through transactions on stock exchanges or off-market transfers: 

(a) All units of such investor held across investment strategies of the concerned SIF shall be frozen for debit, and 

(b) A notice of 30 calendar days shall be given to such investor to rebalance the investments in order to comply with the Minimum Investment Threshold. 

Pursuant to the said notice issued to the investor: 

  1. In case investor rebalances his/her investments in SIF within the notice period of 30 calendar days, the units of SIF of such investor shall be unfreezed, and no further action shall be taken with regard to compliance with Minimum Investment Threshold.
  2.  In case the investor fails to rebalance the investments within the aforesaid 30   calendar day period, the frozen units shall be automatically redeemed by the AMC, at the applicable Net Asset Value of the next immediate business day after the 30th calendar day of the notice period.