The market regulator Sebi on Tuesday issued a mechanism for monitoring compliance with minimum investment threshold under Specialised Investment Funds (SIF).
In case of any active breach of the minimum investment threshold by an investor, including through transactions on stock exchanges or off-market transfers, all units of such investors held across investment strategies of the concerned SIF shall be frozen for debit.
Additionally a notice of 30 calendar days shall be given to such investors to rebalance the investments in order to comply with the minimum investment threshold.
Sebi in its circular further said that in case an investor rebalances his/her investments in SIF within the notice period of 30 calendar days, the units of SIF of such investor shall be unfreezed, and no further action shall be taken with regard to compliance with minimum investment threshold.
On the other hand, in case the investor fails to rebalance the investments within the aforesaid 30 calendar day period, the frozen units shall be automatically redeemed by the AMC, at the applicable net asset value (NAV) of the next immediate business day after the 30th calendar day of the notice period.
For the purpose of SIF, the ‘Active Breach’ shall mean fall in the aggregate value of an investor’s total investment across all investment strategies of SIF, below the Minimum Investment Threshold of Rs 10 lakh, on account of any transactions (i.e. redemption, transfer, sale etc.) initiated by the investor, Sebi said in its circular.
The provisions of this circular shall come into force with effect from the date of this circular, regulator said.
Specialised Investment Fund (SIF) is a framework to bridge the gap between mutual funds (MFs) and portfolio management services (PMS) and it aims to provide sophisticated investors with more flexible investment opportunities while ensuring regulatory oversight.
The minimum amount to be invested in a SIF will be Rs 10 lakh per investor. The fund house can offer a SIP and SWP but it must comply with the minimum threshold amount. The regulator allows SIFs to offer 3 categories of investment strategies: they are equity-oriented strategies, debt-oriented strategies, and the third is hybrid category. The current framework allows only one strategy per category per SIF.
Further, the SIF can be open-ended, close-ended, or interval-based. The redemption process may include a notice period of up to 15 working days, allowing fund managers to manage liquidity effectively.
Based on Sebi’s circular on SIF, there are two routes to establish an SIF. As per the first rule, a fund house must be in operation for a minimum of 3 years with an AAUM of Rs 10,000 crore in the preceding 3 years. The fund house must also have an additional fund manager and must have at least 3 years of experience managing AUM of Rs 500 crore.
As of now some fund houses such as Edelweiss Mutual Fund, Mirae Asset Mutual Fund, SBI Mutual Fund, ITI Mutual Fund, DSP Mutual Fund have launched their SIF investment platform.
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