The race to launch Specialized Investment Funds (SIFs) in India is gaining momentum, marked by a sharp 45.8% month-on-month surge in assets. However, a critical shortage of fund managers with expertise in short-selling strategies is forcing mutual funds to aggressively recruit from the smaller pool of Alternative Investment Funds (AIFs), a Mint analysis reveals.
The SIF Boom and the Talent Hunt
According to data from the Association of Mutual Funds in India (Amfi), SIF assets stood at ₹2,932 crore in November 2025. Despite this impressive growth, the rollout of new SIF products has been sluggish. Of the 11 mutual funds that have received regulatory approval to launch SIFs, only five have actually brought products to market: SBI Mutual Fund, Edelweiss Mutual Fund, Quant Mutual Fund, ITI Mutual Fund, and Tata Mutual Fund.
The primary bottleneck is a severe scarcity of skilled professionals. The talent pool for managing long-short strategies—where funds can profit from both rising and falling stock prices—is extremely limited in India, concentrated largely within AIFs and some proprietary trading desks. To bridge this gap, mutual funds are on a hiring spree, poaching experienced managers from the AIF space.
Notable moves include Tata Mutual Fund hiring Suraj Nanda, who previously ran a long-short AIF at ICICI Prudential AMC. Union Mutual Fund brought on Rajesh Aynor from Prajana Advisors, and Axis Mutual Fund recruited Nandik Mallik from Avendus Capital Alternate Strategies. Other fund houses have shifted talent internally from their existing AIF divisions.
Regulatory Hurdles and Compensation Challenges
The Securities and Exchange Board of India (Sebi) introduced SIFs to fill a gap between traditional mutual funds and Portfolio Management Services (PMS). They require a minimum investment of ₹10 lakh and offer more strategic flexibility than standard mutual funds. However, Sebi's rules also create hurdles. To obtain an SIF license, a fund house must either have three years of operation and ₹10,000 crore in assets, or appoint a Chief Investment Officer with a decade of experience who has managed an average of ₹5,000 crore.
"It is very difficult to find an AIF fund manager who has managed ₹5000 crore because the size of a fund in an AIF is much smaller compared to mutual funds," explained Vaibhav Sanghavi, CEO of ASK Hedge Solutions. This mismatch makes qualified candidates rare.
Furthermore, AIF managers are often hesitant to switch. Compensation structures differ significantly. In AIFs, managers typically earn a share of management and performance fees, which can be substantial. SIFs, operating under the mutual fund umbrella, come with stricter Sebi regulations, including salary disclosures, mandatory personal investment in the fund ('skin-in-the-game'), and tighter trading restrictions.
"AIF fund managers are reluctant to move to SIFs... because of the difference in compensation, fund management rules and availability of different asset classes," said Laukik Bagwe, CIO-SIF at ITI Mutual Fund.
Long-Term Impact on India's Investment Ecosystem
Experts believe the rise of SIFs will, over the long run, help develop a deeper talent pool for sophisticated investment strategies in India. Ravi Kumar Jha, CEO of LIC Mutual Fund, which plans to enter the SIF space, sees it as a "unique opportunity to build talent with specialized skills." He noted that while India has strong long-only expertise, short-side experience remains rare, opening a chance for internal development.
However, the underlying growth of long-short strategies has been historically stunted by an inefficient tax structure for Category-III AIFs, which includes most long-short funds. These funds do not enjoy tax pass-through status, and their derivative income can be taxed at the maximum marginal rate of up to 39%, dampening potential returns. Data from PMS Bazaar shows that within Category-III AIFs, there are 106 long-only funds compared to just 32 long-short funds.
Radha Raman Agarwal of Swyom Advisors noted that employee churn in the AIF space has increased slightly post-SIF introduction. While mutual funds can leverage their scale to attract talent, he expects the SIF ecosystem to eventually deepen the long-short talent pool across the industry.
For now, the SIF story is one of rapid asset growth running headlong into a classic talent crunch, setting the stage for a fierce war for specialized investment expertise in India's evolving financial markets.
