Long-only AIFs (2.19%) outperformed long-short peers (1.28%) with category average alpha of ~90 bps as macro tailwinds and index gains supported broad-based strategy resilience

Alternative Investment Funds (AIFs) extended their recovery in April 2025, as 110 out of 123 tracked AIF strategies by PMS Bazaar posted positive returns for the month. The top 10 performers across categories delivered strong single-digit gains in the range of 5-9%, underlining the growing dispersion and alpha opportunities. Long-only Category III AIFs emerged as the better-performing cohort, with 89 schemes averaging a 2.19% return. In contrast, long-short strategies delivered a more subdued average of 1.28%, highlighting their relative defensiveness in an uptrending market.

The broader equity market continued its upward trajectory, aided by improving liquidity and supportive policy signals. The Nifty 50 TRI rose by 3.48%, while the S&P BSE 500 TRI gained 3.18%. Midcap and smallcap indices also ended higher. 

The rally was driven by multiple macro tailwinds. These included the India Meteorological Department’s above-normal monsoon forecast, the return of foreign portfolio investor flows, and continued support from domestic institutions. The Reserve Bank of India further bolstered sentiment with a 25-basis point repo rate cut to 6% and an accommodative stance, alongside relaxed lending norms aimed at reviving credit growth.

While the domestic markets experienced bouts of volatility early in April 2025, relief came later. Tensions flared after the US President announced a new round of reciprocal tariffs on April 2, triggering a wave of global uncertainty. However, the announcement of a 90-day pause on these tariffs helped restore investor confidence mid-month.

Here is a detailed AIF performance review.

Long-Only AIFs Outperformed with Focused Alpha Delivery

Long-Only AIFs invest primarily in equities with a buy-and-hold approach, aiming for capital appreciation without using short-selling or leverage strategies. Category III Long-Only AIFs delivered a solid performance in April 2025, with 89 tracked strategies posting an average return of 2.19%. Although this lagged the Nifty 50 TRI’s 3.48% and the S&P BSE 500 TRI’s 3.18%, a substantial number of funds stood out with strong alpha generation. Specifically, 24 strategies outperformed the BSE 500 TRI, and 21 beat the Nifty 50 TRI, showcasing the ability of skilled managers to generate excess returns through bottom-up stock selection and high-conviction bets.

Top-performing long-only funds clocked monthly gains ranging from 4.4% to 8.6%, significantly enhancing portfolio values. The dispersion in outcomes also highlighted the growing importance of fund selection, with a clear gap between outperformers and the broader peer group.

Below is a snapshot of category performance:

The top 10 long-only AIFs in April 2025 delivered strong alpha, posting monthly returns between 4.38% and 8.61%. CCV Investment Managers’ Emerging Opportunities Fund-I led the pack, followed by Aarth AIF’s Growth Fund and Alchemy’s Leaders of Tomorrow - 2. These funds capitalized on selective exposure to emerging or recovery-phase stocks. Value-oriented strategies like Negen’s Undiscovered Value Fund and Guardian’s Opportunities Scheme also featured prominently, suggesting investor interest in mispriced opportunities. 

Nippon Life’s NIEO series and 360 ONE’s Turnaround Opportunities Fund continued their momentum with consistent returns. StepTrade and Singularity AMC rounded out the list with focused mid-cap and thematic exposures. The dispersion reflects diverse positioning, with top performers benefiting from tactical agility and high-conviction calls amid an improving market backdrop.

Top 10 Category III Long-Only AIFs – April 2025

*** Post Exp & Tax , ** Post Exp, Pre Tax. ## Gross returns, ### Post Exp & Pre Perf.Fees & Tax ,^^ Post Exp & Tax and Pre Perf.Fees ,  All Performance above are as on 30 April 2025 

Long-Short AIFs Trail as Uptrend Limits Hedged Strategy Gains

Long-Short AIFs use both long and short equity positions to generate absolute returns, managing risk through hedging and tactical exposure shifts. Category III Long-Short AIFs posted relatively muted performance in April 2025, with 34 tracked strategies delivering an average return of 1.28%. This fell short of the broader market gains, with only 4 funds outperforming the S&P BSE 500 TRI (3.18%) and just 2 beating the Nifty 50 TRI (3.48%). The hedged nature of these strategies, which typically excel in volatile or sideways markets, limited upside capture during the equity rally.

Below is a snapshot of category performance:

Despite the subdued average, select strategies continued to stand out. Finideas’ Growth Fund Scheme-1 led with a strong 7.36% return, benefitting from agile positioning. Edelweiss’ Consumer Trends Fund followed with 4.65%, while InCred, Nuvama, and AlphaGrep delivered gains around the 3% mark. The performance dispersion suggests that strategy design and short exposure calibration played a key role in monthly outcomes.

Top 10 Category III Long-Short AIFs – April 2025

*** Post Exp & Tax , ** Post Exp, Pre Tax. ## Gross returns, ### Post Exp & Pre Perf.Fees & Tax ,^^ Post Exp & Tax and Pre Perf.Fees ,  All Performance above are as on 30 April 2025 

May 2025 outlook

After a sharp rebound from March lows, markets enter May on firmer ground, but not without caution. The recovery has been broad but uneven. For AIF investors, especially those in long-only and long-short strategies, this reinforces the importance of active stock selection and tactical flexibility over passive alignment.

Valuations have seen some moderation. Large caps now hover closer to their long-term averages, but mid and small caps still look stretched relative to historical norms. With earnings growth likely to slow, this backdrop calls for measured optimism. 

This is a time to back high-conviction managers who combine valuation discipline with sharp sectoral insight. Cycles are shifting, and so are the opportunities.

Long-Only AIFs may benefit from selective exposure to resilient sectors like private banks and consumption. With mid and small caps still richly valued, fund managers with valuation discipline and bottom-up conviction are well-positioned. Stock dispersion is likely to persist, rewarding strategies focused on fundamentals over broad market momentum.

On the other hand, Long-Short AIFs may regain relative edge as markets navigate potential consolidation. Hedged strategies could offer downside protection if earnings disappoint or volatility resurfaces. Managers who calibrate long-short exposures dynamically and lean into asymmetric setups may outperform. As dispersion widens, flexibility and risk control will remain critical differentiators.

Disclaimer: Investments in Alternative Investment Funds (AIFs), including Fund of Funds (FoF) under Category II AIFs, are subject to market risks, liquidity constraints, and regulatory frameworks as prescribed by SEBI. These investments are intended for sophisticated investors with a high-risk appetite and may not be suitable for all. Past performance does not guarantee future returns, and investors are strongly advised to conduct independent due diligence and seek professional financial advice before investing. Do not consider it as solicitation neither from singularity nor pmsbazaar