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SEBI has recently introduced a new asset class called Specialized Investment Fund (SIF). According to the industry players, this new asset class will cater to the investors who have outgrown the risk-return profile of mutual funds but are not yet big enough to go with PMS and AIFs.
SIFs are a product class that has more flexibility than a regular mutual fund scheme and lower ticket size than PMS and AIFs. The minimum investment amount for investors in SIF is Rs. 10 lakh. This asset class will have TER structure like mutual funds and will be subjected to single issuer limits.
Experts have welcomed SIF as it is expected to help the MF industry to cover entire spectrum of risk and reward profiles.
Swarup Mohanty, Vice Chairman and CEO, Mirae Asset MF said that the introduction of this asset class is a welcome move by the regulator. This will invite new talent and differentiated risk profiles in the MF industry. He also said that the SIFs are slightly different products compared to MFs and the investors who want to participate in this category should seek professional help of MFDs/RIAs as they have higher risk than the MFs.
Swarup pointed out that the industry needs more clarity on product structure and development of SIF.
Ajit Menon, CEO, PGIM India MF, said that the SIFs have a higher risk-return profile, which is a welcoming move for investors who are in the middle range of investment and cannot go with PMS and AIFs.
Ajit claimed that SIFs will offer exposure to concentrated investment portfolio, which is only available in the AIF and PMS structure. SIFs will have a potential for thematic investments better than the MFs with more opportunity in equity domain. SIFs will be similar to what PMS does for slightly more affluent investors.
Madhu Nair, CEO, Union MF said that SIF is an asset class that can prevent the activities that are happening outside regulatory purview. Majority of such investment happens through investors who have outgrown the risk-return profile of MFs and want to take higher returns.
Madhu said that SIFs can provide more efficient returns with cost efficiency. Further, the investors in this asset category are expected to have a higher risk appetite than MF investors, which will result in differentiated strategies. It will also bring more players and more innovation in the MF domain.
Suresh Sadagopan from Ladder7 Wealth Planners said that SIFs will allow the MF industry to cover entire spectrum of risk-reward profiles. The Rs. 10 lakh limit means that SIF is not a product for retail investment rather it is a product for India’s continuously growing upper middle-class investors.
Mumbai MFD Sadashiv Phene said that with the growing maturity of the industry, some clients have outgrown the risk-return profile of the MF industry. These clients need something extra.
Sadashiv also said that there are many investors who have made crores in mutual funds but are yet to explore differentiated products. SIFs can cater to such investors. Due to better tax efficiency than PMS and AIFs, there will be a decent demand for such products in the industry.
