More net-shorts after policy meet: Infina Finance

Infina Finance, which manages Rs 1500 crore in long-short strategy, may increase its ‘net-short positions’ post RBI’s policy meet on September 29. Net short positions are taken by fund managers when they feel share prices are overvalued, bidding a near-term correction.

“As of now, the portfolio is mostly net-long; we cut a lot of ‘shorts’ post market correction in July and August. We may have more net-shorts after the policy meet,” said R. Venkat Subramanian, CEO of Infina Finance.

Venkat expects a “token rate-cut” when RBI meets for policy review next week. “The cut may come with some hawkish statements,” warned Venkat.

Infina pursues absolute return strategies aimed at generating equity like returns with debt-like volatility. To achieve this end, Infina adopts long-short equity strategy, which involves taking long positions in stocks that are expected to increase in value and short positions in stocks that are expected to decrease in value.

“Much more than governance-related issued, am worried about potential outflows from Indian equities market in the event of US Fed raising rates. Nobody really knows what could happen when Fed raises rates… Am sure, some money will flow out of Indian shares,” Venkat said.

Infina Long-Short Portfolio has managed average 16 – 17% returns over the eight years. In its best year, the fund has returned about 23%.

“We’ve always been positive in terms of returns. Even in bad years, we’ve managed about 5% portfolio returns. The key objective of this strategy is to reduce the volatility inherent to an equity portfolio,” Venkat added. Unlike many global hedge funds, Infina’s long short strategy employs zero leverage.

Going ahead, the fund has plans to invest about Rs 200 crore in unlisted companies as well. The investments would be mainly in “new-generation” businesses, Infina officials said. The company has already invested in a food-processing company, a drone manufacturer and an e-commerce start-up. Infina also has plans to deploy capital in international equity markets.