From family offices to affluent individuals, SIFs widen their appeal

They may have the trappings of products for corporate treasuries and wealthy family offices, but specialized investment funds (SIFs) are finding buyers well beyond that circle. The ₹10 lakh entry threshold is attracting a growing pool of affluent individuals, many of whom have built wealth since the covid market rally and become more confident about their investment choices, said Radhika Gupta, managing director and chief executive of Edelweiss AMC, in an interview with Mint.

“Our asset base is not dominated by corporate money. While we have some family offices, much of it comes from hundreds of individual ₹10 lakh transactions.”

The category is still in its early stages but has already crossed ₹40,000 crore in industry-wide assets, with Edelweiss leading at more than ₹14,000 crore, Gupta said. The fund house added over 100,000 investor accounts in its first year. Building a new category has brought its share of challenges, from distributor onboarding to concerns around derivatives, but growing financial awareness is helping drive adoption, she added.

“The response has been amazing and, quite frankly, overwhelming,” Gupta said. SIFs have also had to prove themselves in a difficult market. Funds launched in October had to navigate January-March, she said, likening the experience to cricketers facing Jasprit Bumrah on a difficult pitch.

“When markets fell 10-11% in March, SIFs declined just 1-2%, helping investors see their value. Delivering results in a year when both equities and bonds struggled builds conviction.”

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With oil prices posing a significant risk, alongside geopolitical and macroeconomic challenges, could these derail the recovery in earnings growth?

Expectations were muted going into the first quarter of fiscal year 2027 (FY27) after a difficult January-March, but results surprised on the positive side. It is important to look at sectors individually. Auto sales, for instance, have seen healthy double-digit growth in two- and four-wheelers over the past year.

Higher commodity prices could pressure margins in select industries. How much companies pass on to consumers or absorb, and the volume growth they deliver, will determine the impact. Growth will vary across segments.

The economy is still growing at 7-7.5% or more, which should reflect in corporate performance. Many small-cap companies, for instance, are growing at over 20%. So, it remains a stock-picker's market, with the key question being where the growth is coming from.

Which sectors or pockets are you optimistic about, and are there any narratives that make you cautious?

We stay away from popular narratives, such as a stock being cheap and therefore due for a rebound, or small- and mid-caps being inherently risky. Our focus is on earnings-led growth, not labels such as value or growth. Whether you pay 15 times, 20 times or 25 times, you are paying for a certain level of growth.

Financials remain an underrated segment. While capital market players have done well, the return of credit growth should benefit lenders. Autos also offer opportunities in select pockets.

What is your view on the IT sector?

We are in a wait-and-watch mode and are not writing off Indian IT over the next five years. While valuations have corrected meaningfully and may look attractive, we remain neutral to marginally underweight in our funds and want to wait before taking the plunge.

SIFs have completed about a year since their launch, and the category has already grown to around ₹40,000 crore. Was this response expected? What challenges did you anticipate, and how has the journey been so far?

It is early days, but exciting ones for SIFs. Few expected the category to reach ₹40,000 crore, with us emerging as the largest player at over ₹14,000 crore and adding more than one lakh investor accounts in the first year.

Launching a new category is challenging. Derivatives attract noise, and distribution took time to enter the space, with more mutual fund distributors selling SIFs only in recent months. Having created categories such as Bharat Bond and international funds, we understand these challenges.

But rising financial awareness means investors will trust a fund that addresses their needs and delivers on its mandate. The response has been amazing and, quite frankly, overwhelming.

SIFs also benefited from the market environment. Those launched in October had to navigate January-March, like cricketers facing Bumrah on a difficult pitch. When markets fell 10-11% in March, SIFs declined just 1-2%, helping investors see their value. Delivering results in a year when both equities and bonds struggled builds conviction.

Has the response to SIFs also highlighted the rise in wealthy individual investors, beyond institutional investors, high net worth indivisuals (HNIs) and ultra high net worth individuals (UHNIs)?

That's a great point. People often assume that because SIFs are linked to AIFs and PMS, they cater mainly to corporate treasuries or large family offices. But a SIF caters to someone who can invest ₹10 lakh, which broadly means someone with a net worth of around ₹1 crore.

Many such investors have emerged after the covid rally and understand their investment choices. Our asset base is not dominated by corporate money. While we have some family offices, much of it comes from hundreds of individual ₹10 lakh transactions. That's heartening. Even WhatsApp groups are seeing nuanced discussions around covered calls and other strategies, which is very encouraging.

Do you think SIFs will eventually become a core allocation alongside mutual funds?

I think they will become a core part of people's asset allocation. For fixed-income-plus, large-cap, mid-cap and small-cap exposure, investors may have a mutual fund and an SIF sitting together.

What is your view on thematic commodity funds, such as gold and silver ETFs and passive funds?

I like gold and silver as part of an asset allocation. A 10% allocation is good. They are not wealth-creation asset classes, so they should not account for 80% of a portfolio. I keep saying they are like salt in food: necessary, but in the right dose.

What is your outlook for the markets, and where does India stand in the emerging-market basket?

India is in a moderate position. The economy continues to grow at around 7% in real terms and double digits nominally, making it one of the faster-growing emerging markets. Valuations have also cooled across the board.

Unlike some AI-driven markets growing 5% a month, India's strength lies in consistent and compounding growth across sectors. Taiwan and South Korea, by contrast, are seeing high growth concentrated in a narrower set of sectors and have been penalized recently.

Perhaps India needs to tell its own story better. We are often seen as an anti-AI trade, while global conditions remain unprecedented: US bond yields are at closer to 5%, mortgage rates are high and oil, a traditional vulnerability for India, is higher.

As long as the US offers returns closer to 5%, capital will favour those over Indian rupee assets. When that changes, no one knows. What India can control is delivering earnings growth and profitability. Eventually, money will return. Some greenshoots are already visible post US mid- term elections.

India is being seen as a hedge against the AI trade. Do you think this could attract foreign inflows?

India is currently seen as a hedge against AI, but I think this is a short-term narrative. The challenge is that India does not fit neatly into any investor category: it is neither very cheap nor a high-growth market, and it is not an AI play.

Ultimately, investors seek growth. If earnings growth and returns recover to levels seen two or three years ago, when foreign institutional investor (FII) flows into India remained positive for a meaningful period, investor interest should return.

Earnings for last quarter and this quarter have been encouraging, and this could be a positive trigger for FII flows to resume.