Best SIFs Funds in India: How to Compare and Choose the Right SIF

As more Asset Management Companies (AMCs) introduce Specialised Investment Funds (SIFs), investors now have access to a wider range of investment strategies within a regulated framework. However, unlike traditional mutual funds, SIFs may differ significantly in terms of their investment approach, risk profile, liquidity and costs, making comparisons more nuanced.

Rather than focusing solely on historical returns, it is important to evaluate factors such as the investment strategy, Risk Band, Total Expense Ratio (TER), fund manager experience and liquidity. This blog explains the key parameters that can help investors compare different SIFs and better understand their features before making an investment decision.

Key Takeaways 

• SIFs (Specialized Investment Funds) are SEBI-regulated products for investors familiar with advanced strategies like long-short investing, derivatives, and dynamic asset allocation.
• They are suitable for investors based on individual goals, risk appetite, liquidity needs, and overall portfolio allocation.
• SIFs provide access to strategies not typically available in traditional mutual funds.
• Minimum investment requirement is ₹10 lakh (aggregated across all SIF strategies of the same AMC, as per SEBI rules).
• Available strategy types include Equity Long–Short, Hybrid Long–Short, Active Asset Allocation, and Sector Rotation.
• Evaluating SIFs only on recent returns can be misleading; investors should also assess strategy, risk band, TER, drawdowns, and liquidity terms.
• Higher returns do not automatically mean better funds—risk-adjusted performance is more important.
• Direct Plans usually have lower expense ratios than Regular Plans due to absence of distributor commissions.

What are SIFs and How Do They Work? 

Specialised Investment Funds (SIFs) are SEBI-regulated investment products that allow eligible Asset Management Companies (AMCs) to offer investment strategies beyond those typically available through traditional mutual funds. Depending on the strategy, SIFs may use approaches such as long-short investing, dynamic asset allocation, derivatives, and investments in REITs, InvITs and overseas securities.

When an investor invests in a SIF, they purchase units of a professionally managed investment strategy. The fund manager actively manages the portfolio in line with the fund's investment objective and may invest across different asset classes or use derivatives as part of the strategy.

Some key features of SIFs include:

Since SIFs can vary significantly in terms of strategy, risk profile and portfolio construction, understanding how to compare them is just as important as understanding how they work.

Best SIFs in India 

The table below includes selected Direct Plan SIFs and is arranged by 3-month returns for comparison purposes only. Historical returns should not be the sole basis for investment decisions. Investors should also consider the investment strategy, Risk Band, TER, AUM, liquidity and fund manager experience when evaluating SIFs.

Key Parameters for Evaluating SIFs

There is no single SIF that is universally suitable for every investor. Since SIFs follow different investment strategies, evaluating them involves looking at multiple factors rather than relying on any one metric.

1. Investment Strategy

A SIF's investment strategy determines how it aims to generate returns and manage risk. Since different strategies are designed to achieve different objectives, comparing funds within the same strategy category generally provides a more meaningful assessment than comparing all SIFs together.

2. Risk Profile

Every SIF carries a different level of risk depending on the assets it invests in and the strategies it employs. Reviewing the Risk Band, along with measures such as volatility and maximum drawdown, can provide a better understanding of how a fund has behaved during different market conditions. While higher-risk strategies may offer greater return potential, they can also experience larger fluctuations in value.

3. Fund Manager and AMC

Since SIFs use actively managed investment strategies, the experience of the fund manager and the capabilities of the Asset Management Company (AMC) can be relevant factors. Investors may review the fund manager's investment approach, experience in managing derivative-based strategies, risk management process and performance across different market cycles. The AMC's overall investment philosophy and research capabilities may also provide additional context.

4. Historical Performance

Historical performance can help investors understand how a SIF has performed over different periods, but it should not be viewed in isolation. As many SIFs are relatively new, short-term returns may not reflect how a strategy performs over a complete market cycle. Comparing returns alongside risk measures such as drawdowns, volatility and risk-adjusted returns can provide a more balanced perspective.

5. Liquidity

SIFs may differ in terms of fund structure, redemption frequency, exit load and settlement timelines. Understanding these features helps clarify how easily and quickly an investor can access their money if needed, which can be an important consideration depending on an investor's circumstances.

6. Costs

The Total Expense Ratio (TER) represents the annual cost of investing in a fund and can influence long-term returns. Exit loads and the difference in expense ratios between Direct and Regular plans are also worth comparing. Costs are most usefully assessed alongside a fund's strategy and overall characteristics rather than as a standalone factor.

7. Portfolio Fit

Considering how a SIF fits within an existing portfolio can provide useful context. For example, it may be worth examining whether the strategy adds diversification, overlaps with other existing investments, or increases concentration in a particular asset class or investment style. Evaluating a SIF in the context of an overall portfolio offers a more complete basis for comparison.

A Quick Reference Guide to Comparing SIFs

Rather than relying on a single metric, the following parameters can be used together to compare SIFs more holistically:

No single parameter should drive the comparison on its own. Considering these factors together provides a more complete view of different SIFs.

Things to Keep in Mind When Comparing SIFs

Focusing only on short-term returns is one of the most common pitfalls when comparing SIFs. Comparing funds that follow different investment strategies can also be misleading, since each strategy is designed for a different objective. Other factors worth considering include the Risk Band, liquidity features and total costs, rather than relying on any single metric. Reading the Investment Strategy Information Document (ISID) for each fund provides important information about its objective, investment approach, risk factors and expenses.

Conclusion

Specialised Investment Funds (SIFs) offer investors access to a broader range of investment strategies than traditional mutual funds, making it important to compare funds beyond their recent performance. Factors such as the investment strategy, Risk Band, historical performance, liquidity, costs and portfolio fit can provide a more comprehensive understanding of a fund's characteristics.

Since different SIFs are designed with different objectives and risk profiles, comparing them using a structured framework can help investors better understand how each fund differs. Reviewing the scheme documents and key fund details before investing can also provide valuable insights into a SIF's investment approach and associated risks.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.