Sebi’s ₹10-lakh minimum investment rule: What every investor needs to know

The Securities and Exchange Board of India (Sebi) has recently unveiled a new investment avenue called the Specialised Investment Fund (SIF)—a landmark move that signals the evolving maturity of Indian capital markets and investor sophistication. With a minimum investment threshold of ₹10 lakh, SIFs are designed to give investors access to a more advanced and diversified set of investment strategies than those typically found in conventional mutual funds.

What are SIFs?

SIFs are investment vehicles that aim to provide exposure to sophisticated and flexible investment strategies. These strategies may involve equity, debt, real estate, investment trusts, or derivatives like futures and options. Unlike traditional mutual funds that are often benchmark-driven, SIFs function more like absolute return strategies, where fund managers deploy specific tactics to achieve a predefined objective, regardless of broader market indices.

Importantly, SIFs are being introduced through the mutual fund route, which ensures that they benefit from the robust regulatory framework, operational efficiency, and governance standards that mutual funds adhere to. This also means they will leverage the expansive mutual fund distribution network and compliance infrastructure, further democratising access while ensuring that guardrails remain intact through oversight from the mutual fund’s Investment Management Committee.

Think of SIFs as an evolved hybrid between mutual funds and high-net-worth investment products like Category III Alternate Investment Funds (AIFs) or Portfolio Management Services (PMS). While AIFs have a high entry point (₹1 crore), SIFs bring similar strategic possibilities to a wider investor base at a relatively accessible level.

Understanding the ₹10-lakh threshold

The ₹10-lakh minimum investment rule applies not per SIF, but at a pan-level aggregate across all SIF schemes. This means an investor can diversify across multiple SIFs, switch between them, or use tools like Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP), and Systematic Transfer Plans (STP)—provided the total investment across all SIFs remains at or above ₹10 lakh.

The threshold isn’t arbitrary. It’s a deliberate filter to ensure that investors entering this space have the financial depth and understanding to navigate the associated risks. SIFs are not plain-vanilla instruments. Their use of derivatives and alternative asset classes requires a level of awareness and risk tolerance typically seen in more seasoned investors.

Why this matters: Democratising advanced investment strategies

Previously, access to complex strategies like long-short positions, arbitrage, or high-leverage derivatives was largely reserved for ultra-high-net-worth individuals (UHNIs) through AIFs or PMS structures. By lowering the barrier to ₹10 lakh, Sebi is extending these opportunities to emerging affluent investors who may not yet qualify as UHNIs but are sophisticated enough to benefit from such products.

And because SIFs are being offered through the mutual fund platform, this democratisation is strengthened by the widespread reach and trust that mutual funds command in India, along with built-in compliance, transparency, and governance mechanisms.

Aligning with market maturity

Indian investors today are more informed and digitally empowered than ever before. There’s a growing appetite for products beyond the basic large-cap or multi-cap mutual funds. SIFs are a response to this evolving demand, and Sebi’s rule acknowledges that the market is ready for such nuanced offerings.

Shifting from benchmark-based to strategy-based investing

SIFs offer a paradigm shift in how fund performance is evaluated. Unlike regular mutual funds that chase benchmarks, SIFs aim to deliver absolute returns based on the fund manager’s strategy—be it through long-short positioning or tactical asset allocation. The success of an SIF lies in the manager’s acumen, not in beating an index.

While currently benchmark-agnostic, it is possible that over time, specific benchmarks for long-short or other complex strategies may evolve, and SIFs may gradually align with these emerging indices. Hence, the benchmark neutrality may not be permanent but a transitional feature of this early-stage product.

Who should consider SIFs?

While the ₹10 lakh threshold provides an initial filter, potential investors must also ask: Do I understand the risks of derivative instruments and alternative assets?

Am I looking for strategies that aim to generate absolute returns rather than merely outperform benchmarks?

Am I comfortable with non-traditional investment horizons and risk-return dynamics?

If the answer to these is yes, SIFs could be a potent addition to your portfolio.

Views expressed are personal. The author is the Managing Partner, Scripbox.