The ₹10 Lakh Question

SIFs and the Art of Choosing a Strategy

In the first two parts of this series, we built the foundation. We established what a Specialised Investment Fund (SIF) actually is — a new SEBI-regulated category sitting between mutual funds and Portfolio Management Services — and we walked through who it suits and what to weigh before it enters a portfolio. This third instalment goes a layer deeper. Two questions come up in almost every conversation I have with clients and distributor partners: why has the regulator fixed the entry point at ₹10 lakh and once an investor clears that gate, what should actually determine which of the available strategies they choose?

Why ₹10 Lakh and Not ₹10,000 or ₹1 Crore?

The number itself is not arbitrary. Mutual funds in India carry no meaningful entry barrier by design — they are built for the widest possible base of savers. At the other end, Portfolio Management Services typically start at ₹50 lakh and Alternative Investment Funds at ₹1 crore, structures meant for investors who can absorb concentrated, illiquid, long-horizon bets. SIFs were created to occupy the space in between: a regulated, mutual-fund-adjacent structure that still permits long-short positioning, sector rotation and tactical asset allocation — tools that were previously available only at PMS or AIF ticket sizes.

SEBI’s ₹10 lakh threshold is best understood as a suitability filter rather than a revenue filter. A scheme that can run unhedged derivative exposure, take short positions and operate with lower liquidity than a plain-vanilla fund. It needs an investor base that understands those mechanics and can withstand the swings that come with them. The threshold is a proxy for that readiness, in the same way accredited-investor status substitutes for it at the very top end — accredited investors are, in fact, exempt from the ₹10 lakh rule altogether.

Three details of how the threshold actually works are worth knowing precisely, because they shape how an advisor should frame the product to a client:

• It applies at the PAN level, aggregated across all SIF strategies offered by a single AMC — not scheme by scheme. An investor spreading ₹10 lakh across two strategies from the same fund house meets the requirement; the same amount split across two different AMCs does not.
• Systematic routes are allowed. SIPs, SWPs and STPs can be used within a SIF, provided the investor’s total commitment stays at or above the threshold.
• A passive breach — the investment value dropping below ₹10 lakh purely because of market movement — is not treated as a violation. But once that happens, and the investor wants to redeem, then the investor’s only option is to redeem the entire remaining balance, not a partial amount.

For an advisor, the practical implication is this: the ₹10 lakh mark is not a small-ticket variant of a mutual fund SIP, and it shouldn’t be pitched as one. It is a deliberate line drawn by the regulator to keep this category anchored to investors who can genuinely absorb its risk profile.

The Architecture Underneath: Three Categories, Seven Strategies

Article one touched on this briefly; here is the fuller picture, because the category headline hides real variation underneath. SEBI has permitted seven specific strategies, grouped into three categories.

Equity-Oriented

• Equity Long-Short Fund — holds a minimum 80% in equity and equity-related instruments, with the flexibility to take short positions via derivatives to manage risk or generate alpha, rather than being purely long-only like a conventional equity fund.
• Equity Ex-Top 100 Long-Short Fund — applies the same long-short toolkit outside the top 100 companies by market capitalisation, aiming to exploit inefficiencies in the mid- and small-cap space.
• Sector Rotation Long-Short Fund — tactically moves across a maximum of four sectors based on the manager’s read of the market cycle.

Debt-Oriented

• Debt Long-Short Fund — takes long positions in debt instruments and manages interest-rate risk through short exposure via derivatives.
• Sectoral Debt Long-Short Fund — applies the same approach within debt instruments of a specific sector.

Hybrid

• Active Asset Allocator Long-Short Fund — dynamically allocates across equity, debt, REITs, InvITs and select commodity derivatives depending on the market cycle.
• Hybrid Long-Short Fund — requires a minimum 25% allocation each to equity and debt, with unhedged derivative exposure capped at roughly 25% of assets, blending growth and income objectives within one structure.

It is worth noting where the category’s assets currently sit. Hybrid Long-Short strategies account for the overwhelming majority of total SIF AUM to date — a reflection of how both AMCs and early investors have gravitated toward a strategy that dampens volatility rather than one that leans fully into directional equity or debt calls. That concentration is itself useful information: it tells us where the market’s comfort level currently is, not necessarily where the best fit for every investor lies.

Live Examples: How This Looks in the Market Today

Theory is easier to hold onto with names attached. By mid-2026, well over a dozen AMCs had SEBI approval to run SIF platforms, with roughly two dozen schemes live or in NFO across the five broad strategy families. A few illustrate the range well:

• Quant Mutual Fund was among the first movers, launching its QSIF platform with both an Equity Ex-Top 100 Long-Short fund targeting inefficiencies outside India’s largest 100 companies and a Hybrid Long-Short fund blending equity, debt and derivative overlays.
• Edelweiss’ Altiva SIF took the hybrid route for its debut, building its long-short fund around arbitrage and event-driven positioning — an income-first design meant to perform steadily through corporate-action-heavy periods rather than chase direction.
• SBI’s Magnum Hybrid Long-Short fund leans conservative, running a covered-call-driven approach aimed at behaving more like an enhanced fixed-income product than a growth vehicle.
• ICICI Prudential (iSIF), Bandhan (Arudha), Tata (Titanium), ITI Mutual Fund (Diviniti) and 360 ONE (Dyna) have since added their own variants, broadening choice across equity, hybrid and debt strategies.
• Today there are 13 AMC offering 27 schemes in different Equity and Hybrid Categories

Early return data across these hybrid launches — covering only a few months since inception and therefore illustrative at best — already shows how differently ‘hybrid’ can behave depending on the manager’s approach. An arbitrage-and-events-led fund and a covered-call-led fund have both delivered steady, positive early returns through the same market window, while a more tactically equity-oriented hybrid fund posted a small early dip. Same category label, three distinct outcomes — which is exactly why the strategy-selection questions below matter more than the category name on the offer document.

Choosing a Strategy: What Actually Deserves Weight

Clearing the ₹10 lakh threshold answers the eligibility question. It does not answer the harder one — which of the seven strategies, if any, belongs in a specific portfolio. A few factors deserve more attention than they typically get in the initial pitch.

1. Liquidity terms, read literally

SIFs are structured as interval funds in several cases, with redemption windows that differ by category — commonly daily for equity-oriented strategies, weekly for debt-oriented ones, and twice-weekly for hybrid structures — and AMCs may impose notice periods of up to fifteen days. An investor used to same-day mutual fund redemptions needs to internalise this before committing capital, not after placing a redemption request.

2. Track record is genuinely short

This is still an early category, with most schemes carrying well under two years of history. A short NAV track record is not a red flag by itself, but it does mean the underlying logic of the strategy and the manager’s broader experience — including any PMS or AIF pedigree — deserve more scrutiny than they would for an established mutual fund.

3. Match the objective, not the label

A long-short equity strategy chasing alpha through both rising and falling markets is solving a different problem from a hybrid strategy trying to smooth volatility while preserving equity-like tax treatment. The label on the strategy matters less than the actual objective it is built to serve for that specific client — growth, income, or downside dampening.

4. Understand the built-in guardrails

Every strategy operates within caps set by SEBI — unhedged derivative exposure is generally limited to around 25% of assets, and no SIF can allocate more than 20% of its NAV to debt instruments below investment grade from a single issuer. These aren’t marketing details; they define the actual boundaries of the risk being taken, and a good selection conversation covers them before it covers projected returns.

5. Cost structure and tax treatment

Several SIF strategies carry PMS-style fee structures, including performance fees over a hurdle rate, alongside the more familiar expense ratio. At the same time, a meaningful advantage over PMS and AIF structures is that several SIF schemes retain mutual-fund-style equity taxation — a detail worth confirming precisely for the specific scheme in question, since it can materially change the after-tax outcome an investor takes home.

Put together, the ₹10 lakh threshold and the seven-strategy architecture are two sides of the same design principle: SEBI has built a category that offers real sophistication, but has fenced it carefully — through eligibility, through disclosure, and through structural caps — so that sophistication doesn’t quietly become opacity.

A Closing Word on SIF Bazar

This deeper dive is exactly the kind of ground-level detail that separates a category still being explained from one being properly distributed. Understanding why the threshold sits at ₹10 lakh, what the seven strategies actually permit, and which questions genuinely matter when selecting a scheme is knowledge that needs to travel from the regulator’s circular to the client’s kitchen table — and that journey runs through Mutual Fund Distributors.

SIF Bazar (www.sifbazar.in) was built to be that connective layer: a platform where MFD partners can access strategy-level comparisons, NISM-VD-aligned resources and onboarding support that turns the mechanics covered in this article into a conversation an MFD can confidently have with a client. As the SIF category moves from early curiosity toward disciplined adoption across India, platforms like SIF Bazar exist to make sure the distribution infrastructure keeps pace with the product’s growing sophistication.

Tejpal Singh Bagga, CFP®
Co-Founder, Vrishank Financial Services & SIF Bazar