Lesson 3 of 5 · SIF Foundation

The Seven SIF Strategies in Three Groups

SEBI permits seven SIF investment strategies in three groups: equity-oriented, debt-oriented and hybrid. This lesson names each one, gives its defining allocation rule, and explains the limits common to all seven.

Fact-checked 8 October 20263 practice questions in the game

A closed list

A SIF cannot run whatever strategy its manager likes. SEBI's framework lists seven permitted investment strategies in three groups, and a SIF may launch only one strategy under each of the seven categories. An AMC's SIF therefore cannot run two strategies of the same category side by side.

The effect is that a strategy's name tells the reader which set of rules it follows.

Equity-oriented: three strategies

An Equity Long-Short Fund holds at least 80% in equity and equity-related instruments. An Equity Ex-Top 100 Long-Short Fund holds at least 65% in equity of stocks outside the top 100 by market capitalisation. A Sector Rotation Long-Short Fund holds at least 80% in equity of at most four sectors.

Debt-oriented: two strategies

A Debt Long-Short Fund invests in debt instruments across duration, meaning it is not confined to one maturity band. A Sectoral Debt Long-Short Fund invests in debt instruments of at least two sectors, with at most 75% in any one sector.

Hybrid: two strategies

An Active Asset Allocator Long-Short Fund allocates dynamically across equity, debt, equity and debt derivatives, InvITs and commodity derivatives. A Hybrid Long-Short Fund holds at least 25% in equity and at least 25% in debt.

What all seven share

Every name contains 'Long-Short' for a reason. In every strategy, unhedged short exposure is allowed only through derivatives and only up to 25% of net assets, in addition to derivatives used for hedging and rebalancing. Total gross exposure, counting securities and derivatives together, cannot exceed 100% of net assets, so there is no leverage.

No strategy assures returns. The framework has no 'absolute return' category, short positions can lose money just as long positions can, and every SIF carries a warning that investments in a SIF involve relatively higher risk including potential loss of capital, liquidity risk and market volatility.

Rules at a glance

Equity Long-Short FundAt least 80% in equity and equity-related instrumentsSEBI Master Circular for Mutual Funds, Chapter 21

Equity Ex-Top 100 Long-Short FundAt least 65% in equity of stocks outside the top 100 by market capitalisationChapter 21

Sector Rotation Long-Short FundAt least 80% in equity of at most four sectorsChapter 21

Debt Long-Short FundDebt instruments across durationChapter 21

Sectoral Debt Long-Short FundDebt of at least two sectors; at most 75% in any one sectorChapter 21

Active Asset Allocator Long-Short FundDynamic allocation across equity, debt, equity and debt derivatives, InvITs and commodity derivativesChapter 21

Hybrid Long-Short FundAt least 25% in equity and at least 25% in debtChapter 21

Strategies per categoryOnly one in each SIFChapter 21

Illustration

Reading the names

An AMC's SIF offers an Equity Long-Short Fund, a Hybrid Long-Short Fund and a Debt Long-Short Fund. From the names alone, Anil, 39, a chartered accountant in Indore, knows the first must keep at least 80% in equity and equity-related instruments, the second at least 25% each in equity and debt, and the third invests in debt across duration.

He also knows this SIF cannot add a second Equity Long-Short Fund, though it could add a Sector Rotation Long-Short Fund, a different category. What the names do not tell him is how any strategy will perform.

Key points

SEBI permits seven SIF strategies in three groups: three equity-oriented, two debt-oriented and two hybrid.
A SIF may launch only one strategy under each of the seven strategy categories.
In every strategy, unhedged short exposure is through derivatives only, up to 25% of net assets, and gross exposure cannot exceed 100% of net assets.
No strategy assures returns, and capital can be lost.

Common misunderstandings

Seven strategies are not seven groups: there are three groups, holding three, two and two strategies.
'Long-short' does not mean equal long and short positions: unhedged short exposure is capped at 25% of net assets.
A debt-oriented or hybrid label does not mean capital is protected: every strategy can lose money.

Questions people ask

Can one SIF offer two strategies of the same category?

No. A SIF may launch only one investment strategy under each of the seven strategy categories.

What does 'Ex-Top 100' refer to?

Stocks outside the top 100 by market capitalisation. In the mutual fund categorisation the top 100 companies are the large caps, so this strategy's 65% minimum is in companies ranked below them.

Does the group decide how a strategy is taxed?

Not by itself. Tax follows the strategy's actual portfolio: equity-oriented treatment, for instance, needs at least 65% in listed domestic equity shares, and derivative positions do not count.

What this lesson relies on

SEBI Master Circular for Mutual Funds, 20 March 2026, Chapter 21 (Specialized Investment Funds)
SEBI circular of 27 February 2025 on the regulatory framework for Specialized Investment Funds
SEBI Master Circular for Mutual Funds, 20 March 2026, Chapter 3 (categorisation; definition of large cap)

This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.