The Securities Exchange Board of India (“SEBI”), in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Chapter VI-C of the SEBI (Mutual Funds) Regulations 1996 vide Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/26[1], dated February 27, 2025, (“Circular”) issued the regulatory framework for Specialized Investment Funds (“SIFs”). The Circular shall come into effect from April 01, 2025.
This development is part of the continued evolution of the investment landscape in India, with the aim to create a product that bridges the existing gap between Mutual Funds (“MFs”) and Portfolio Management Services (“PMS”).
The current range of investment products with varying risk-reward profiles are intended to meet the investment needs of retail, high net-worth, and institutional investors. The regulatory framework and prudential norms governing these investment vehicles become progressively more flexible from MFs to PMS to Alternative Investment Funds (AIFs), in sync with the investment profile and investment size of these products.
However, over the years, a gap has emerged between MFs and PMS in terms of portfolio flexibility, creating an opportunity for a new investment product. To bridge this gap, the SEBI (Mutual Funds) Regulations, 1996 have been amended to introduce the broad regulatory framework for the new investment product – SIF.
A comprehensive regulatory framework for the SIFs has been provided in Annexure A of the Circular. The AMFIs shall issue necessary guidelines/ standards as required under this circular by March 31, 2025. A detailed view of the regulatory framework for SIFs can be accessed at https://www.sebi.gov.in/legal/circulars/feb-2025/regulatory-framework-for-specialized-investment-funds-sif-_92299.html.
With the issuance of this Circular, the Stock Exchanges, Clearing Corporations, and Depositories are directed to take necessary steps and put in place necessary systems for the implementation of this Circular and bring the provisions of this Circular to the notice of market participants and disseminate the same on their website.
[1] https://www.sebi.gov.in/legal/circulars/feb-2025/regulatory-framework-for-specialized-investment-funds-sif-_92299.html