🏦 AIFs and Wealth Managers Turn to Mutual Funds as SEBI’s SIF Framework Redefines Market Landscape

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🏦 AIFs and Wealth Managers Turn to Mutual Funds as SEBI’s SIF Framework Redefines Market Landscape

Mumbai, June 18, 2025 — India’s ₹52 lakh crore mutual fund industry is entering a new phase of evolution as alternative investment funds (AIFs), portfolio managers, and wealth management firms increasingly pursue mutual fund licences. This strategic realignment comes in response to changing regulatory dynamics and favorable tax treatment, particularly after SEBI’s rollout of the Specialised Investment Fund (SIF) framework.

While the mutual fund industry currently consists of 46 asset management companies, several high-profile entrants are queuing up for regulatory clearance. As of March 31, 2025, SEBI has received applications from at least five new sponsors, including:

• AlphaGrep Securities Pvt. Ltd.

• Monarch Networth Capital Ltd.

• Marcellus Investment Managers Pvt. Ltd.

• Wealth First Portfolio Managers Ltd.

• Nuvama Wealth Management Ltd.

On Monday, AlphaGrep Securities became the latest to announce that it has received in-principle approval from SEBI to sponsor a mutual fund—a significant move for a firm previously focused on algorithmic and high-frequency trading.

📈 From Alternatives to Mainstream: A Structural Shift

The transition comes on the heels of licence approvals for Jio Financial Services Ltd. and BlackRock Financial Management Inc., who together formed JioBlackRock. The joint venture received its in-principle nod last month and has already filed draft documents to launch three debt mutual funds.

Also entering the fray are Capitalmind Financial Services and Pantomath Capital Advisors, both of whom are awaiting final registration.

This wave of transitions marks a repeat of a trend seen a decade ago, when PMS firms like Parag Parikh Financial Advisory Services successfully morphed into mutual fund entities, converting high-net-worth clients into retail mutual fund investors.

🔍 The SIF Catalyst: Regulatory and Tax Advantages

SEBI’s Specialised Investment Fund (SIF) category is proving to be a game-changer. Introduced to offer alternative strategies such as long-short, hybrid, and multi-asset funds within a mutual fund wrapper, SIFs require a minimum investment of ₹10 lakh—significantly lower than Category III AIFs (₹50 lakh) or PMS (₹1 crore).

Taxation, too, tilts in favor of mutual funds:

• Mutual Funds: Long-term capital gains taxed at 12.5%

• AIFs: Gains taxed at 30% for residents, 39% for non-residents

These differences have prompted even sophisticated managers to reconsider the cost-benefit calculus of operating as an AIF or PMS versus transitioning to or complementing offerings with mutual fund products.

🥇 Quant Becomes First to Launch SEBI-Approved SIF

Quant Mutual Fund, in its latest investor release, announced that it had received SEBI’s first approval to operate a Specialised Investment Fund. The fund will offer long-short strategies in equity, debt, and hybrid formats.

Quant, which manages over 95 lakh folios, highlighted that SIFs are designed for “sophisticated investors with high risk appetite and deeper understanding of market dynamics.”

🔮 Outlook: Democratizing Complex Strategies

As the regulatory playing field evolves, India’s asset management ecosystem appears poised for a significant transformation. SIFs not only promise greater transparency and lower entry thresholds but could also democratize access to hedge fund-like strategies within the mutual fund framework.

“The shift toward mutual funds is structural, not cyclical,” said a senior industry executive. “The combination of favorable tax treatment, regulatory clarity, and product innovation is hard to ignore.”

With heavyweight entrants like JioBlackRock, Quant, and AlphaGrep leading the charge, SEBI’s mutual fund license roster is expected to look very different by the end of 2025.