As the launch of Special Investment Funds approaches in less than two weeks, many top mutual funds have yet to submit applications to market regulator SEBI for approval to introduce the product.
SEBI introduced the SIF framework to bridge the gap between mutual funds and portfolio management services, with the new framework set to be effective from April 1. The aim is to provide sophisticated investors with more flexible investment options while ensuring regulatory oversight.
According to a mutual fund executive, most fund houses are still working on their strategy to enter this new business and are expected to approach SEBI in the coming days.
Wealth managers are cautiously optimistic about allocating funds to this new product. Feroze Azeez, Deputy CEO of Anand Rathi Wealth, highlighted that SIFs may have higher volatility than traditional mutual funds due to their high-growth strategy. He advised investors to limit exposure to these products to 1-2% of their portfolio due to the lack of a track record in India.
Ranju Rajan, Head of Managed Accounts at Axis Securities, emphasized the importance of a prescribed model format for the Investment Strategy Information Document, including a scenario analysis. He also mentioned that the subscription and redemption frequency of investment strategies may vary based on the asset category.
Manish Goel, Founder and MD of Equentis Wealth Advisory Services, noted that the ability of SIFs to invest in international markets is a significant advantage for wealth managers seeking portfolio diversification. He suggested a cautious approach initially, evaluating performance and liquidity before making substantial allocations.
Nalin Moniz, CEO of Alternate Assets at Ionic Asset by Angel One, mentioned that HNIs may favor SIFs for their governance, transparency, standard KYC, and tax benefits similar to mutual funds. He believes these funds can play a crucial role in asset allocation during volatile market conditions.
Akshat Garg, AVP of Choice Wealth, highlighted the specialized nature of SIFs, which may justify premium advisory fees and provide additional revenue streams for wealth management firms. He stressed the importance of smart fund structuring, effective risk management, and consistent returns for the success of SIFs.
Overall, while SIFs offer flexibility and potential for higher returns, wealth managers are advised to proceed with caution and assess each fund’s performance and liquidity before making significant investments.
