Edelweiss Mutual Fund CEO Radhika Gupta believes that the newly introduced Specialised Investment Fund (SIF) category is poised to revolutionize how Indian investors approach alternative investment strategies. According to Gupta, SIFs effectively bridge the existing gap between traditional mutual funds and Alternative Investment Funds (AIFs).
Speaking at the Morningstar Investment Conference, Gupta highlighted that SIFs offer a unique combination of flexibility and regulatory comfort. She elaborated that these funds can provide access to a diverse range of strategies, including long-short, private credit, and real assets. Edelweiss's SIF platform, Altiva, aims to create "thoughtful, absolute-return-oriented products" across these strategies, designed to deliver value beyond traditional mutual funds.
Gupta emphasized that investor education and awareness of risk are crucial for SIFs to effectively reach the mass affluent segment. She cautioned that without proper groundwork, SIFs could risk remaining limited to institutional investors, similar to the initial trajectory of AIFs. With a minimum investment threshold of ₹10 lakh, SIFs open access to a broader investor base, but understanding the associated risks is paramount.
Gupta advises investors to view SIFs as a "solution" rather than a specific asset class, emphasizing that allocation should be need-based. She suggests investors should consider what specific purpose a SIF serves in their portfolio before allocating funds. For instance, Edelweiss's SIF is designed as a tax-efficient income solution, suitable for investors with debt or income as part of their asset allocation.
SIFs offer the flexibility to create products that lower market exposure and risk, potentially delivering better risk-adjusted returns. A key advantage of SIFs lies in their ability to utilize derivatives beyond just hedging, which was previously the limit for mutual funds. This expanded flexibility allows for the creation of products that can reduce market exposure and overall risk.
While SIFs offer greater flexibility, Gupta advises that they are not designed for retail or small investors due to the high entry requirement. She suggests that SIFs are more suitable for experienced investors, such as those familiar with PMS or AIFs, or those looking to hedge directly with futures and options. Even seasoned mutual fund investors can consider SIFs as a middle-ground solution between fixed income and equity investments.
Echoing a note of caution, Gupta advises that investors should only allocate a small portion of their portfolio to SIFs unless they possess a liquid net worth of at least ₹1-2 crore. She stresses that just having ₹10 lakh available does not automatically qualify an investor for SIFs. Investors must be fully prepared and aware of the investment risks involved, especially considering the potential for market volatility.
SEBI's new regulations for SIFs, effective from April 1st, are viewed by Gupta as a significant milestone in the investment landscape. These regulations provide experienced asset managers with the opportunity to offer innovative solutions across seven categories to sophisticated investors. Gupta believes that SIFs have the potential to be a game-changer, allowing asset managers to expand their platform and capabilities, provided they are implemented with the right guardrails and communication.
