SEBI Tightens Rules for New Specialised Investment Funds with ₹10 Lakh Minimum Threshold

India’s market regulator, the Securities and Exchange Board of India (SEBI), has unveiled detailed rules and a monitoring mechanism to govern its recently introduced Specialised Investment Funds (SIFs). These changes aim to enhance investor protection and reduce misuse of this higher-risk investment category. 

Under the updated framework, SIFs were officially mandated in July 2025 as a bridge between mutual funds and Portfolio Management Services (PMS). SEBI requires a minimum investment of ₹10 lakh per investor at the PAN level across all SIF strategies. This threshold ensures that only sufficiently sophisticated investors access the product.

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Investment strategies consist of not only long-short equity funds, focused sector rotation, and debt long-short funds, but also dynamic asset allocation with up to 25% short exposure capability.

New SEBI Rule: Key Highlights

• Minimum investment required is ₹10 lakh.
• AMCs and fund managers must monitor compliance daily.
• Units will be auto-redeemed if the value drops below ₹10 lakh (excluding market losses).
• Market-driven value drops are exempt from redemption.
• Rules apply to both new and existing investors.
• Compliance is checked daily based on the end-of-day NAV.

Who Can Launch SIFs?

Asset managers wishing to launch SIFs must meet stringent qualifications:

Either they must operate for at least three years with average assets under management (AUM) of at least ₹10,000 crore,
Or they must appoint a chief investment officer with 10 years’ experience managing at least ₹5,000 crore of assets, plus a fund manager with 3 years ' experience over ₹500 crore.

SEBI has also mandated distinct branding for SIFs. These funds must carry differentiated names, logos, and separate websites or pages to avoid confusion with regular mutual funds. Sponsor branding can be used for up to five years but must appear in a smaller font than the SIF name.

Compliance Monitoring & Enforcement

SEBI has introduced a mechanism to monitor the ₹10 lakh minimum threshold. Asset management companies will conduct daily checks to ensure investors’ aggregate holdings across all SIF schemes remain above the threshold. If an “active breach” occurs—through redemption, transfer or similar transactions—all units held by that investor in SIFs will be frozen immediately for debit.

Investors in breach receive a 30‑calendar‑day notice to restore compliance. If they rebalance within that window, units will be unfrozen with no penalty. Failure to do so will prompt an automated redemption of all frozen units at the applicable NAV on the next business day after the notice period expires.

Risks and Warnings

Despite the regulated format, SIFs carry significantly more risk than traditional mutual funds. Their ability to take unhedged short positions and operate concentrated portfolios may amplify both gains and losses. Analysts warn that the lack of historic performance data adds to uncertainty. Investors are urged to assess whether the fund strategies align with their risk appetite and financial goals.

Broader Positioning

SEBI’s SIF framework occupies the middle ground between retail mutual funds and high-end PMS or Alternative Investment Funds (AIFs). With a regulated structure, moderate entry threshold and access to sophisticated strategies, more than passive exposure but less complexity than PMS/AIF is what SIFs are going to offer investors.

Conclusion

SEBI’s new rules on Specialised Investment Funds aim to ensure regulatory rigour and investor protection by enforcing a clear ₹10 lakh minimum, strict eligibility and branding criteria, and timely compliance checks. While offering sophisticated strategy access, SIFs remain suited only to seasoned investors willing to bear higher risk.