SBI Magnum Hybrid Long Short Fund Regular Plan: SIF with Equity Taxation & Hedging

The ₹10 lakh Minimum Investment Threshold (MIT) is a key regulatory feature of SEBI’s Specialised Investment Funds (SIF) framework, designed to ensure these advanced strategies are suitable for informed, higher-capacity investors. For the SBI Magnum Hybrid Long Short Fund Regular Plan – an interval hybrid long-short SIF under SBI’s Magnum platform – proper understanding of MIT breaches helps avoid potential disruptions such as debit freezes or auto-redemptions.

SEBI’s circular dated July 29, 2025 on MIT monitoring under SIFs clearly differentiates between active breaches (caused by investor actions) and passive breaches (caused by market movements). This section explains the rules in detail, with practical context for this equity-oriented SIF, to support compliant investing while accessing its hedging capabilities and tax treatment under current laws.

The ₹10 Lakh MIT: PAN-AMC Aggregate Rule in SIFs

SEBI mandates a ₹10 lakh MIT aggregated across all SIF holdings for a given PAN with one AMC – not per individual scheme. For investors in the SBI Magnum Hybrid Long Short Fund Regular Plan, this means total exposure across all SBI SIFs (including this fund and any others under Magnum SIF) must remain at or above ₹10 lakh.

• Accredited investors are exempt from the MIT.
• Daily monitoring by SBI MF, using end-of-day NAV via RTAs, flags any shortfalls.
• Investors can build or maintain the threshold via lump sums, SIPs, or STPs, subject to scheme-level minimum application amounts as specified by SBI MF in the KIM/SID.

This aggregate approach promotes focused, committed exposure to sophisticated SIFs like Magnum Hybrid Long Short, while aligning with SEBI’s investor protection goals.

Active Breach: Investor-Initiated Drops Below MIT

An active breach occurs when the aggregate SIF value falls below ₹10 lakh due to an investor-initiated transaction, such as redemptions, switches out, or transfers.

Common Triggers in the Context of Magnum Hybrid Long Short Fund:

• Partial redemption during the fund’s specified interval windows that reduces total SBI SIF holdings below ₹10 lakh.
• Switch-out to non-SIF schemes or changes in holding pattern (e.g., transfers) lowering the PAN-level aggregate.

SEBI addresses active breaches with structured enforcement to maintain the framework’s integrity.

SEBI-Mandated Process for Active Breach:

• Debit Freeze: Immediate restriction on debits (redemptions or switches out) from all SBI SIF units for that PAN. Fresh purchases/top-ups remain allowed during rectification.
• 30-Calendar-Day Rectification Window: Notice provided; investors can top up to restore the aggregate to ≥₹10 lakh.
• Auto-Redemption if Unrectified: All remaining SIF units shall be redeemed at the applicable NAV on the next business day after the 30th calendar day.

This process ensures compliance, particularly important for interval-style funds where redemption opportunities are periodic.

Passive Breach: Market-Driven Drops Below MIT

A passive breach occurs when the MIT falls below ₹10 lakh solely due to market movements, with no investor-initiated transaction.

Common Triggers:

• NAV decline due to fluctuations in the fund’s equity (indicative 65–75%), debt (25–35%), or REITs/InvITs (up to 10%) allocations, or impacts on hedged/derivative positions.

SEBI treats passive breaches more flexibly, acknowledging external market factors.

Handling of Passive Breach:

• No Mandated Freeze or Auto-Redemption: SEBI does not require immediate debit restrictions or forced exits.
• Board-Approved Policy: SBI MF must follow an internal board-approved policy for such cases, which may allow existing holdings to continue while monitoring for natural recovery or voluntary top-ups.

Passive breaches thus provide breathing room, consistent with the fund’s design for moderated volatility through hedging.

Practical Implications and Tips for Investors

In interval-style SIFs like SBI Magnum Hybrid Long Short Fund, where redemptions occur on specified days, poorly planned partial exits near the ₹10 lakh threshold can more easily lead to active breaches. Passive dips, however, are handled supportively under AMC policy.

These are practical suggestions (not SEBI requirements):

• Maintain a buffer (e.g., 20–30% above ₹10 lakh) to cushion market volatility.
• Use SIP/STP for gradual top-ups if needed.
• Regularly check PAN-level aggregate via SBI MF portal or CAS statements.
• Plan redemptions/switches carefully, especially near the threshold, and seek advisor input.

Why MIT Monitoring Matters for This Equity-Oriented SIF

The SBI Magnum Hybrid Long Short Fund Regular Plan is structured as equity-oriented (indicative equity allocation above 65%), making it eligible for equity mutual fund tax treatment under current rules (LTCG at 12.5% on gains exceeding ₹1.25 lakh after 12 months, STCG at 20%), provided the fund maintains requisite equity levels and tax laws remain unchanged. Understanding active vs passive breaches ensures seamless access to these benefits alongside hedging strategies.

SEBI’s approach – enforcement for active breaches, flexibility for passive – balances protection and practicality. For tailored advice on MIT compliance, taxation, or suitability of this SIF, consult a SEBI-registered investment advisor. Investments are subject to market risks; read scheme documents carefully.