Quant, Edelweiss, SBI MF launch Specialised Investment Funds: What investors should note
Indian investors have a new product to explore: Specialised Investment Funds (SIFs), recently cleared by the Securities and Exchange Board of India (SEBI). Targeted at affluent investors seeking strategies beyond traditional equity and debt, SIFs are being launched by leading asset managers under separate branding across equity, debt, and hybrid categories.
Quant Mutual Fund became the first mover in September 2025, followed quickly by Edelweiss and SBI Mutual Fund, which rolled out hybrid long-short SIFs on October 1. Industry watchers expect several other fund houses to follow suit, making SIFs one of the most closely tracked product launches in the asset management industry this year.
How SIFs differ from other products
SIFs are designed as a bridge between mutual funds and portfolio management services (PMS). Mutual funds allow participation with as little as Rs 100, while PMS and alternative investment funds (AIFs) require commitments of Rs 50 lakh to Rs 1 crore. By contrast, SIFs set the bar at Rs 10 lakh, or just Rs 1 lakh for accredited investors.
What truly sets SIFs apart is their ability to take naked short positions of up to 25% of assets — a strategy unavailable to mutual funds and PMS except for hedging. Naked shorting involves selling securities without owning them, enabling SIFs to potentially profit in falling markets as well as rising ones.
Edelweiss Altiva Hybrid Long-Short Fund
Among the first wave of launches, Edelweiss Mutual Fund introduced the Altiva Hybrid Long-Short Fund (AHLSF). The scheme blends equity, debt, arbitrage, and derivative strategies, with subscriptions open daily and redemptions twice a week (Mondays and Wednesdays). The NFO window runs from October 1–15, 2025.
The scheme offers regular and direct plans with both growth and IDCW options. Expense ratios are capped at 2.35%, in line with mutual fund norms.
Portfolio construction
SEBI rules require hybrid long-short SIFs to maintain at least 25% exposure each in equity and debt. AHLSF leans conservative, placing nearly 50% of assets in debt, primarily AAA sovereigns and AA-rated corporate bonds. The rest is divided between arbitrage (20–40%), unhedged equity (up to 10%), and derivative strategies (10–15%).
Unhedged equity positions will focus on special situations such as IPOs, buybacks, mergers, and demergers. When such opportunities are limited, allocation tilts back to debt.
On the derivatives side, strategies include covered calls, straddles, strangles, and protective puts. Covered calls — the core approach — allow the fund to generate premium income while capping upside. Straddles and strangles are suited for volatile, directionless markets, while protective puts act as insurance against steep declines.
This makes AHLSF a relatively conservative entrant in the hybrid space, aiming to deliver 1–2% higher returns than traditional arbitrage funds. In contrast, SBI Magna SIF Hybrid Long-Short Fund plans a bolder approach with 65–75% gross equity exposure.
Taxation advantage
Because AHLSF’s mix includes nearly 50% equities, arbitrage, and derivatives, it qualifies as a “non-equity, non-debt” fund under tax rules. This provides a clear edge: long-term gains are taxed at just 12.5% after two years, compared to higher rates applicable to debt or conservative hybrid funds.
Should you invest?
SIFs bring strategies previously out of reach for Indian mutual fund investors, promising diversification and the ability to profit across market cycles. Yet they are not without risk. Long-short strategies require asset managers to make accurate calls on market direction, allocation, and derivative positions. Missteps can amplify volatility and erode returns.
With no domestic track record yet, experts suggest that investors wait and watch how SIFs perform before committing significant capital. For most investors, traditional mutual funds remain the preferred route for long-term wealth creation and portfolio simplicity. SIFs, at this stage, may best suit seasoned investors comfortable with higher risk in pursuit of differentiated strategies.