SIFs: First real test amid volatility after mixed early returns. Check details

Specialised Investment Funds (SIFs), designed as a bridge between mutual funds and PMS/AIFs, are now being tested in a volatile market environment, as reported by ET Wealth.

SIFs offer greater flexibility than traditional mutual funds, including the ability to take long and short positions and actively use derivatives.

These funds aim to deliver consistent, risk-adjusted returns and protect downside across different market cycles. “This strategy offers a defensive way to invest in the broader market, seeking to participate in the upside while minimising the downside and volatility associated with the segment,” points out Chintan Haria, Principal - Investment Strategy at ICICI Prudential Mutual Fund.

These funds aim to deliver consistent, risk-adjusted returns and protect downside across different market cycles. “This strategy offers a defensive way to invest in the broader market, seeking to participate in the upside while minimising the downside and volatility associated with the segment,” points out Chintan Haria, Principal - Investment Strategy at ICICI Prudential Mutual Fund.

Ongoing global uncertainty and market volatility have triggered the first real performance test for these strategies.

Initial returns have been uneven, with some funds navigating volatility well while others have struggled to maintain consistency. Manuj Jain, Co-founder, ValueMetrics Technologies, said, “Managing long-short strategies requires a very different skill set compared to traditional long-only portfolios. Robust risk management frameworks will be critical, given the use of derivatives and short positions in these strategies.”

Given the disparate outcomes in both returns and volatility, investors must evaluate options carefully. “Since the track records are nascent, it is important not to look only at returns but rather focus on risk metrics amid the correction. Hybrids show promise for shallower drawdowns via debt/arbitrage anchors, while equity long-short funds may exhibit higher volatility but potential alpha in dispersion phases,” said Ankur Punj, MD and Business Head, Equirus Wealth.