SIF Investor Guide
What a Specialized Investment Fund is, how long-short strategies use futures and options, the 5 SEBI categories, and how each SIF fund is allocated.
Section 1
SEBI launched SIF in April 2025. It is regulated like a mutual fund and sits between mutual funds and PMS.
A SIF lets the fund manager hold long positions and take short positions through derivatives, up to 25% of net assets unhedged. That is the key difference from a mutual fund, which can only buy and hold. The full comparison with PMS and AIF Cat III is in Section 5.
Section 2
Everything a SIF does with derivatives, explained with everyday examples: hedged vs unhedged, gross vs net, and every tool a fund manager uses.
Both are contracts based on the price of something else. One is an obligation. One is a right.
You and the other party are locked in. Whether prices go up or down, both sides must fulfil the contract at expiry.
Like a rental agreement at ₹20,000 a month for 12 months. Even if market rents drop to ₹15,000, landlord and tenant are both bound.
The buyer may exercise or simply walk away. If the deal turns unfavourable, the buyer loses only the upfront fee paid for the right.
Like a booking token with a builder. You pay ₹1 lakh to lock in a house at ₹50 lakh for 3 months. Buy it or not, your choice.
The booking token: pay ₹1 lakh to lock a house at ₹50 lakh.
Crop insurance: a farmer pays a premium to guarantee a minimum price. Put options give stocks the same protection.
The builder who sold the token must sell at ₹50 lakh if the buyer exercises.
The insurer who sold the policy must buy at the guaranteed price if prices crash.
Your neighbour pays you ₹50,000 today for the right to buy your flat at ₹70 lakh any time this year. If prices never reach ₹70 lakh you keep the ₹50,000 and the flat. SIF funds do this on stocks they already hold.
Before the Union Budget you don't know if gold will rise or fall, but you expect a big move. You buy the right to buy and the right to sell at today's price. A large move either way pays; no move costs only the premiums.
Same as a straddle, but you buy the right to buy gold at ₹55 and the right to sell at ₹45 when it trades at ₹50. It costs less because both rights are further away, so the market has to move more.
Your house is worth ₹50 lakh. You buy a guarantee to sell at ₹45 lakh for ₹50,000 and fund it by selling your neighbour the right to buy at ₹60 lakh for ₹50,000. You can't lose more than ₹5 lakh or gain more than ₹10 lakh.
A trader buys onions in Mumbai at ₹20/kg and at the same moment locks a sale in Delhi at ₹22/kg. The ₹2 is locked in whatever onion prices do next. In a SIF: buy a stock in the cash market and sell the same stock in futures.
Hedged: you own a flat and hold a price guarantee, so a fall is covered and risk is capped. Unhedged: you own the flat with no protection, so you get the full gain if prices rise and the full loss if they fall.
You own 10 flats (gross = 10) but have sold booking tokens on 7 of them, so your real directional exposure (net) is 3. A SIF can hold 65% gross equity for equity taxation while its net market exposure is much lower.
You expect IT to outperform real estate. You buy IT stocks and short real estate stocks, and profit from the gap between the two sectors rather than from the direction of the whole market.
| Market condition | Long-only mutual fund | Long-short SIF | Why it differs |
|---|---|---|---|
| Rising +15% | +15% | +10% to +13% | Short positions limit some upside |
| Sideways / flat | 0% to +2% | +3% to +6% | Arbitrage and derivatives generate income |
| Falling −15% | −15% | −8% to −12% | Short positions cushion the fall |
Ranges are illustrative, based on typical fund design. Actual performance depends on the manager and market conditions and is not guaranteed.
Section 3
Each category serves a different investor. Choosing the wrong category is the biggest mistake.
A mix of fixed income, arbitrage, hedged equity and limited directional exposure. Targets FD-plus returns. The usual starting point for first-time SIF investors.
80–100% equity with up to 25% unhedged short. Full equity market risk plus short risk, for long-horizon investors comfortable with volatility.
Mid, small and micro cap universe only (outside the top 100 stocks) with a long-short overlay. The highest return potential and the highest volatility in the SIF universe.
Concentrated in 4 of 12 SEBI-defined sectors at any time. High conviction and tactical, entirely dependent on the manager's sector model.
Dynamic multi-asset: equity, debt and commodities, with the manager deciding the mix. The most flexible mandate in the SIF universe.
Section 4
Illustration for a 30% bracket investor. Base tax rates, excluding cess and surcharge.
| Period | FD (4.4% net) | Group A SIF (7.9% net, assumed) | Difference |
|---|---|---|---|
| 2 years | ₹27.2L | ₹29.4L | +₹2.2L |
| 5 years | ₹30.9L | ₹37.6L | +₹6.7L |
| 10 years | ₹38.1L | ₹56.5L | +₹18.4L |
Tax group of every SIF fund, fund by fund: SIF Tax Guide.
Section 5
Four regulated categories with completely different rules.
| Feature | Mutual Fund | SIF | PMS | AIF Cat III |
|---|---|---|---|---|
| Minimum investment | ₹500 | ₹10 lakh | ₹50 lakh | ₹1 crore |
| Short selling | No | Yes (25% cap) | Yes | Yes |
| Daily NAV | Yes | Yes | No | No |
| SEBI regulated | Yes | Yes | Yes | Yes |
| Tax entity | Investor | Investor | Investor | Fund level |
| STCG rate | 20% flat | 20% or slab | 20% or slab | Max marginal |
| LTCG rate | 12.5% | 12.5% | 12.5% | Max marginal |
| ₹1.25 lakh exemption | Yes (equity) | Yes (Group A) | Yes (equity) | Not applicable |
Section 6
Fund allocations are being refreshed. See the SIF Dashboard for every fund.
Section 7
Five steps from decision to investment.
Make sure your PAN-based KYC is current. Company PAN KYC is needed separately for corporate investments. AND Fintech assists with all documentation.
Use the category guide above. Most first-time SIF investors start with Hybrid Long-Short.
Compare allocation, tax group (A or B), fund manager and liquidity against your time horizon. Compare SIF funds side by side.
Each SIF needs ₹10 lakh minimum per fund house per PAN. You can invest with several fund houses at ₹10 lakh each. This applies to company PANs too.
We handle the documentation and fund house submission, and review your portfolio with you every quarter.
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A Specialized Investment Fund (SIF) is a SEBI-regulated investment category launched in April 2025. It sits between mutual funds and PMS: fund houses can run long-short strategies, including unhedged short positions through derivatives of up to 25% of net assets, with a minimum investment of ₹10 lakh, daily NAV and mutual fund-level regulation.
A long-short SIF buys stocks the manager expects to rise (long positions) and uses futures and options to take short positions on stocks or sectors expected to fall, or to hedge existing positions. Short positions limit some upside in rising markets and cushion the fall in declining markets.
A hedged position is a stock the fund owns together with an offsetting derivative, such as selling the same stock in futures, so a price fall is largely covered. An unhedged position has no such protection: the fund gains fully if the price rises and loses fully if it falls. Gross equity counts all equity positions; net equity counts only the directional, unhedged part.
The minimum investment is ₹10 lakh per investor per fund house, at PAN level. You can invest with several fund houses at ₹10 lakh each. The same rule applies to company PANs.
SIF funds fall into Group A (equity-oriented: 20% STCG, 12.5% LTCG after 12 months, ₹1.25 lakh annual LTCG exemption) or Group B (hybrid-oriented: STCG at slab rate, 12.5% LTCG, no exemption). qSIF Hybrid Long-Short, qSIF Active Asset Allocator and Titanium Hybrid Long-Short have a 24-month LTCG holding period. The SIF Tax Guide maps every fund.
Fund allocations are updated once a month from each fund house's portfolio disclosure. NAV is updated fortnightly, on the 15th and 30th of every month.
Written & reviewed by Dwipa Shah, NISM Series XIII certified SIF distributor (ARN-301536, APRN05170). AND Fintech is an AMFI-registered mutual fund distributor and not a SEBI-registered investment adviser or tax advisor. This guide is for education only and is not investment advice. Returns shown are illustrative and not guaranteed. SIF investments are subject to market risks; read all investment strategy documents carefully. Consult a CA before tax-based decisions.
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