Sebi approved specialised Investment Schemes in March 2025, and we wrote about the type of schemes that can be on offer. You can read that article here.
Three schemes are launched already from Quant mutual fund – Qsif SIF, from SBI Mutual Fund – Magnum SIF, and from Edelweiss Mutual Fund – Altiva SIF.
13 new SIF schemes have filed for approval, and the industry will therefore see a significant number of new entrants in this space.
To recap, SIFs are designed like mutual funds but have some unique features.
The minimum investment is Rs. 10 lacs per fund house. ie, if a fund house launches more than one SIF, then the total investment in each one of them should be Rs. 10 lacs.
A significant differentiating factor between SIF and a mutual fund is that up to 25% of the portfolio can be shorted. Meaning that if the fund manager believes that equity or debt prices are going to fall, they can sell them with the hope of buying back in the future at a lower price and pocket the difference.
These strategies enable you to generate income when the price of a security declines, which is not feasible within the mutual fund framework.
While the overall structure of all SIFs is defined by SEBI, the way every scheme within a category is managed can vary significantly; therefore, advisors need to understand the fund manager’s approach to running the fund. This makes it an engaging prospect for investors to understand the product and decide if it aligns with their own needs.
While all three launches are interesting, we will talk about the Altiva SIF in this note.
Altiva is a hybrid long-short fund. Hybrid means it will invest in both equity and debt, as well as strategies permitted by the SIF framework.
- The fund will invest in equities, but it will be fully hedged. (It means that if they buy in cash, the exact amount will be sold in futures. (Buying in cash means you pay cash fully for the securities, and you receive delivery of those in your demat account. Selling in futures means you sell the security in the futures and options market at a predetermined price.) The goal is to find and make a small profit on every trade.
- They will also invest in good, pedigreed debt securities that can give them a good income with stability.
- Besides these, they will identify opportunities they call enhanced drivers. Special situations include IPOs, open offers, buybacks, mergers and demergers, index inclusion or exclusion, etc. Additionally, they will analyse derivative strategies, such as equity Long/Short/Put, Call parity, Straddle, and Strangle.
You can access the full product presentation, as well as a brief overview of these strategies, here.
While the strategies are complex and not easily understood by new investors, the goal of this fund is to generate a return similar to that of debt and enhance it with derivatives. The mutual fund framework is simpler and does not allow these.
In the case of Altiva, their stated goal is to generate returns that are higher than those of the Arbitrage schemes in mutual funds. They refer to it as the Arbitrage Plus strategy.
This is an interesting development as Arbitrage schemes of mutual funds have attracted very high flows. Debt funds are now taxed at the slab rate, making them unattractive due to the typically low post-tax return.
Flows have shifted to Arbitrage funds, as their returns are also modest. However, since they are taxed like equity funds, post-tax returns are better than those of debt funds. (Equity funds, long-term capital gains, 1 year 12.5%)
Hybrid SIFs, such as Altiva, will be taxed as LTCG – 12.5%- but only after a 2-year holding period. In the short term, the returns will be taxed at the investor’s slab. This makes it attractive for debt allocation for investors.
They aim to outperform Arbitrage funds’ returns by 2-3 % points. If they can achieve that goal, this fund will be attractive and should garner a good allocation.
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