SEBI has issued this circular to formalize and standardize the application and disclosure process for Specialized Investment Funds (SIFs) under the SEBI Mutual Funds Regulations, 1996. This is in line with previous circulars dated February 27, 2025, and April 9, 2025, outlining the regulatory framework for SIFs.
Key Components of the Circular
- Application Format for Establishing SIFs (Annexure I)
Mutual Funds must apply in a standardized format which includes:
- Basic Information: Brand name, Mutual Fund name, AUM over past 3 years, compliance history.
- Personnel Details:
- Route 1 (Track Record Route): Requires the Mutual Fund to meet AUM and operational history benchmarks.
- Route 2 (Alternate Route): Requires appointment of experienced personnel like CIO and an additional fund manager with specific AUM thresholds.
- Supporting Documents: Certificates, undertakings, and declarations as per eligibility route.
- ISID Format for Investment Strategies (Annexure II)
The Investment Strategy Information Document (ISID) is divided into three parts:
Part I – Highlights/Summary of the Investment Strategy
Includes a structured summary covering:
- Name, Category, Type: With reference to SEBI’s regulatory framework for SIFs.
- PRC Matrix (for debt strategies), product labeling, risk banding, and benchmark risk level.
- Key Attributes:
- Liquidity/listing information
- Benchmark (Total Return Index)
- Subscription/redemption frequency
- Load structure, NAV disclosure, timelines for redemptions and dividends
- Minimum investment thresholds, special facilities (e.g., SIP/STP/SWP)
- Due Diligence Certificate confirming compliance with SEBI guidelines.
Part II – Detailed Investment Strategy Information
Includes:
- Asset Allocation Table: Minimum and maximum allocation across instruments like derivatives, overseas securities, REITs/InvITs, etc.
- Investment Universe: List of eligible instruments.
- Approach: Investment rationale, risk control mechanisms, and turnover policy.
- Benchmarking: Justification for chosen benchmark index.
- Fund Manager Disclosure: Background and experience of strategy manager(s).
- Differentiation: How the strategy differs from other offerings by the same SIF.
- Performance History: (if applicable) showing annualized and absolute returns.
Part III – Operational, Legal & Miscellaneous Disclosures
Includes:
- NAV Computation: Methodology and sale/re-purchase price disclosure.
- Expenses:
- NFO Expenses: Must not be charged to the strategy.
- Recurring Expenses (TER): Including slab-wise estimates and impact on returns.
- Load Structure: Exit load policy.
- Eligibility and Application Process: Who can invest, how to apply, cut-off times.
- Account Statements and Taxation: Statement of account timelines, tax implications for residents and non-residents.
- Rights and Penalties: Unitholder rights, disclosure of pending litigations and regulatory action.
Key Compliance and Disclosure Requirements
- Detailed appendices for documents required under both eligibility routes.
- Consistent references to the SEBI Master Circular for Mutual Funds dated June 27, 2024.
- Emphasis on clarity, non-misleading communication, and easy accessibility via websites.
Notable Observations
- SEBI mandates functional website links for continuous disclosures.
- AMC and Trustee companies must give multiple declarations on compliance, accuracy, and integrity of disclosures.
- The circular enforces strong governance around fund personnel and operations, especially under the alternate eligibility route.
