Since their launch in October 2024, SIF assets have risen from around ₹2,000 crore to more than ₹31,000 crore by the end of August, according to Rajesh Singla, CEO and Fund Manager, Alpha AMC, a SEBI-registered, Gurugram-based alternative asset management company.
SIFs are designed for investors seeking more flexibility than traditional mutual funds while remaining within a regulated fund structure.
But there is an important distinction: SIF is not a single investment strategy, and the risk can vary significantly across products.
Why are investors turning to SIFs?
SIFs allow fund managers to use strategies such as dynamic asset allocation, hedging and selective short positions.
Monjit Gogoi, Founder, AlphaVerse, an Indian wealth-tech and financial intelligence platform, describes them as a bridge between mutual funds and Portfolio Management Services (PMS), appealing to investors who want greater flexibility while retaining a regulated structure.
The early investor base also appears to be relatively affluent.
Singla said the average ticket in hybrid long-short strategies is around ₹37 lakh, well above the ₹10 lakh minimum, pointing to significant participation from HNIs and family offices.
There is no single SIF risk profile
A key point for investors is that two SIFs can behave very differently even if they belong to the same broad category.
Arihant Bardia, CIO and Founder, Valtrust, an Indian multi-family office and wealth management firm, said one hybrid long-short product could largely combine arbitrage and debt, another could run a more volatile long-short strategy, while a third could pursue an absolute-return approach.
Investors, therefore, need to look beyond the category name and understand the strategy, its sources of return and potential downside.
Does long-short mean downside protection?
Not necessarily.
A short position can help hedge a portfolio or potentially benefit from falling prices, but it does not guarantee that losses will be avoided.
Singla said investors should not treat “long-short” as synonymous with “protected”. The mandate gives the manager a tool to manage downside, but does not guarantee how effectively or consistently that tool will be used.
Kumar Binit, CEO, airpay money, a personal financial wellness and investment platform, similarly cautioned that sophistication should not be confused with safety. Risk-management tools can reduce risk, but cannot eliminate market losses.
What has the recent correction shown?
Recent volatility has provided an early test for SIFs, but the category does not yet have a long market-cycle history.
Singla said hybrid long-short strategies that could moderate net equity exposure held up better during recent weakness, while some equity-oriented long-short strategies recorded mid- to high-single-digit declines since inception.
Gogoi said a correction can show how a strategy handles losses and volatility, but one period is not enough to establish how it will perform across a full market cycle.
Singla estimates that many SIFs have only six to 12 months of track record.
Bardia, however, points out that some of the underlying strategies are not new and have been used through AIFs and managed accounts for years. That experience, though, should not be confused with a long live track record for the specific SIF.
What does the ₹10 lakh minimum mean?
SIFs have a minimum investment requirement of ₹10 lakh per investor at the PAN level, with accredited investors exempt.
But the threshold is an entry requirement, not a suggested allocation.
Gogoi said the right allocation depends on an investor’s portfolio, risk appetite and ability to stay invested through periods when the strategy does not perform as expected.
Binit similarly said investors should assess how an SIF fits with their existing investments, liquidity needs and overall financial position.
Don’t overlook liquidity
SIFs can have different subscription and redemption structures, with redemption notice periods of up to 15 working days, Binit said.
For investors, that makes liquidity an important part of the decision. The money allocated to an SIF should not be money that may be needed at short notice.
Investors should check redemption frequency, notice periods, lock-ins and other exit conditions before investing.
They should understand what the specific SIF does, how it makes money and what could cause it to lose money.
That means looking beyond the name and headline return at its investment mandate, asset allocation, permitted short exposure, drawdowns during market stress, costs and liquidity.
Bardia recommends going beyond the SID and fact sheet to understand the strategy and its potential downside, while Singla suggests examining performance specifically during periods when markets fell.