Long-Short Funds & SIFs: India's New Alpha Strategy for Volatile Markets?

• Long-short funds and Specialised Investment Funds (SIFs) are gaining traction in India's mutual fund industry as a potential source of alpha and risk management in volatile markets.
• Fund managers like Sandeep Tandon (Quant Mutual Fund), Gaurav Mehta (SBI Mutual Fund), and Bhavesh Jain (Edelweiss Mutual Fund) discussed SIFs' role in risk-adjusted returns, addressing arbitrage-hybrid gaps, and managing mid/small-cap volatility.
• SIFs offer benefits like benefiting during market declines, tax efficiency (gains taxed only upon redemption), and better beta management, unlike traditional long-only funds.
• SBI Mutual Fund launched a hybrid long-short fund for moderately higher returns than arbitrage with limited variability. Edelweiss Mutual Fund positions its SIF as an arbitrage-plus strategy, using option writing and special situations.
• Challenges include investor perception of shorting, early adoption stages requiring distributor derivatives exams, and the need for continued investor and distributor education for category growth.

Why It Matters: Long-short funds and SIFs aim to deliver risk-adjusted returns and manage volatility in India's uncertain markets.