With less than two weeks to go before the launch of Special Investment Funds, most leading mutual funds have yet to file papers with market regulator SEBI seeking approval to launch the product.
SEBI introduced the SIF framework to bridge the gap between MFs and portfolio management services. The new framework will be effective from April 1 and aims to provide sophisticated investors with more flexible investment opportunities while ensuring regulatory oversight.
“Most of the fund houses will be approaching SEBI in next few days as they are still working on a strategy to enter this new business,” said a mutual fund executive.
Wealth managers cautiously optimistic
Meanwhile, most wealth managers are cautiously optimistic about allocating funds to this new product.
Feroze Azeez, Deputy CEO of Anand Rathi Wealth, said SIFs will have higher volatility than traditional MFs as the portfolio is built with a high-growth strategy.
Since these products are new to India, there is not enough track record to see their performance, and investors are currently not recommended to have over 1 to 2 per cent exposure for these products in the portfolio, he said.
Ranju Rajan, Head- Managed Accounts, Axis Securities said a prescribed model format of the Investment Strategy Information Document including a scenario analysis, depicting the expected loss to the investor due to market movements is expected before March-end.
In addition, the subscription and redemption frequency of an investment strategy may be distinct. An equity category may have daily redemptions, but a debt category may have once a week redemptions, he said.
Manish Goel, Founder and MD of Equentis Wealth Advisory Services, said the SIF’s ability to invest in international markets is an added advantage and will be useful for wealth managers looking to diversify portfolios beyond domestic investments.
While SIFs offer flexibility, he said most wealth managers should initially take a cautious approach, assessing performance and liquidity before making large allocations.
Equity-focused SIFs can deliver annualised returns of 12–18 per cent, while debt-focused SIFs may provide returns of 7-9 per cent, he added.
Nalin Moniz, CEO—Alternate Assets at Ionic Asset by Angel One, said SIFs may be favoured by HNIs as they provide the governance, transparency, standard KYC, and taxation of an MF.
These funds can play an important role in an investor’s asset allocation and they are being launched at a time when both equity and debt markets have turned volatile, he added.
Akshat Garg, AVP of Choice Wealth, said the fund’s specialised nature may justify premium advisory fees, enhancing revenue streams for wealth management firms while delivering superior value to clients.
The success of SIF hinges on smart fund structuring, effective risk management and consistent returns, he added.
