India’s mutual fund industry is on the cusp of a major shift, as hedge fund-style strategies become available to a broader investor base following the launch of Specialised Investment Funds (SIFs) by the Securities and Exchange Board of India (SEBI) earlier this year.
SIFs allow asset managers to use derivatives, short stocks, and pursue absolute-return strategies previously limited to hedge funds and high-threshold alternative investment funds (AIFs).
SIFs lower the entry point to around NIR1m ($11,400) – a tenth of AIF minimums – while offering tax treatment similar to traditional mutual funds, making them more accessible and cost-efficient. Several Indian asset managers, including Edelweiss Asset Management, SBI Mutual Fund, and Quant Mutual Fund, have already launched or are preparing SIFs, aiming to tap the growing appetite for risk-adjusted returns.
Industry leaders describe the new products as “hedge fund-lite”, bridging the gap between institutional and retail investing. Edelweiss CEO Radhika Gupta says the next decade in India’s markets will focus on sophistication and teaching investors about risk-adjusted returns. Quant founder Sandeep Tandon expects SIFs to grow to half the size of India’s active mutual fund segment within a decade, citing global liquid alternatives as a model.
SIFs are designed to offer market-neutral and tactical strategies that cushion downside risk while providing exposure to absolute-return opportunities. However, challenges remain, including a limited universe of derivatives (around 200 stocks currently) and a shortage of quantitative talent capable of running complex long-short portfolios.
Despite these hurdles, SEBI-backed SIFs are expected to reshape India’s $900bn mutual fund market, attracting both retail and high-net-worth investors while offering asset managers a new, scalable growth avenue. Mirae Asset CEO Swarup Mohanty predicts SIFs could account for 20–30% of the industry within five years, while established AIF and portfolio management firms are seeking licenses to launch their own products under the new framework.
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