Long-only AIFs averaged 5.69% returns in May 2025 sharply above long-short peers (1.68%) as broader market strength, FII flows, and sector momentum powered alpha generation

Alternative Investment Funds (AIFs) extended their winning streak in May 2025, with 128 out of 133 tracked strategies by PMS Bazaar delivering positive returns in a bullish May month. 

The performance gap between long-only and long-short strategies widened this month, as long-only Category III AIFs capitalised on market tailwinds to post a robust 5.69% average return. In contrast, long-short AIFs delivered a muted 1.68%, reflecting hedged positioning amid ongoing index volatility. This is a 400-bps outperformance in the favour of long-only AIFs from a category standpoint.

Of the 94 long-only AIFs tracked by PMS Bazaar, 88 outperformed the Nifty 50 TRI (1.92%) and 68 beat the BSE 500 TRI (3.54%). For long-short strategies, only 15 and 5 beat the Nifty 50 TRI and BSE 500 TRI respectively.

The market's strength in May was driven by persistent FII and DII inflows, broad-based sector gains, and a third consecutive month of index-level rally. Small Cap and Mid Cap indices led the charge, aided by strong showings in capital goods, real estate, and PSU banks.

AIFs require a minimum investment of ₹1 crore, making them accessible only to accredited or high-net-worth individuals. They are preferred by wealthy investors seeking niche strategies, concentrated bets, and lower correlation to traditional investment avenues.

Let us see the May-2025 AIFs returns in detail.

Long-only AIFs: Double-digit winners dominate a strong May 2025



Long-only Category III AIFs delivered a stellar performance in May 2025, with an average return of 5.69%. This comfortably outpaced the BSE 500 TRI (3.54%) and Nifty 50 TRI (1.92%). Out of 94 strategies tracked, 68 beat the BSE 500 TRI and 88 outperformed the Nifty 50 TRI, underlining the strength of unhedged long only equity strategies in a broad-based market rally.

Below is a snapshot of Long-only AIFs category performance for May 2025:

Ten long-only AIFs posted double-digit returns, led by Alchemy Capital’s Emerging Leaders of Tomorrow (12.05%) and Rational Equity Flagship Fund I (11.55%). SageOne featured prominently with two funds in the top 5—India Growth OE Fund (11.08%) and Flagship Growth 2 Fund (10.94%).

Other notable names included Motilal Oswal’s Founders Fund Series 1 (10.81%), PGIM India’s Equity Growth Opportunities Series II (10.72%), and MoneyGrow Alpha Fund 1 (10.46%). With most of these funds maintaining high-conviction portfolios, the segment’s strong May 2025 showing reinforces the case for active, unconstrained long-only equity allocations.

Here is a table on the top-10 long-only AIFs for the May 2025.

Note: *** Post Exp & Tax , ** Post Exp, Pre Tax. ## Gross returns, ### Post Exp & Pre Perf.Fees & Tax ,^^ Post Exp & Tax and Pre Perf.Fees , # Below 1 Year returns are Simple Annualized.  All Performance above are as on 31 May 2025. 

Long-short AIFs: Muted gains but few standouts in a risk-on May month

Long-short AIFs posted an average return of 1.68% in May 2025, trailing both the BSE 500 TRI (3.54%) and Nifty 50 TRI (1.92%) as their hedged stance limited upside in a strong market. 

Of the 35 strategies tracked, only 5 outperformed the BSE 500 TRI, while 15 managed to beat the Nifty 50 TRI—highlighting selective alpha generation.

Below is a snapshot of Long-Short AIFs category performance for May 2025:

Swyom Advisors’ India Alpha Fund topped the charts with a 7.60% return, far ahead of its peers. Edelweiss’ Consumer Trends Fund (4.86%) and Aditya Birla’s India Special Opportunities Fund (4.03%) also stood out with strong tactical gains.

Other notable performers included SBI Funds’ Optimal Equity (3.80%), Nuvama’s Multi Asset Strategy Return Fund (3.72%), and Whitespace Alpha’s twin offerings, each returning over 3%. While the category was more defensive, a few managers effectively captured upside through sectoral positioning or limited net exposure.

Here is a table on the top-10 long-short AIFs for May 2025.

Note: *** Post Exp & Tax , ** Post Exp, Pre Tax. ## Gross returns, ### Post Exp & Pre Perf.Fees & Tax ,^^ Post Exp & Tax and Pre Perf.Fees , # Below 1 Year returns are Simple Annualized.  All Performance above are as on 31 May 2025. 

June 2025 outlook: 

As we step into June, the backdrop for Alternative Investment Funds (AIFs) remains broadly constructive. The Indian equity market has recovered all of its early-year losses, with strong FII and DII inflows, upbeat sector rotation, and improving risk sentiment driving participation across capitalisations. 

For long-only AIFs, the recent trend of outperformance versus benchmarks bodes well, especially with mid- and small-cap pockets showing strength. Fund managers with high-conviction, concentrated bets may continue to benefit if trends hold.

Long-short AIFs, while relatively muted in May, are well-positioned to shine if volatility returns. Global triggers like US inflation data, policy cues from central banks, and other news flow could create tactical opportunities for these funds to deploy hedges and dynamic exposures effectively.

With earnings season behind and valuations near historical averages, alpha will depend more on smart positioning than market direction. 

For investors, AIFs continue to offer an edge through differentiated strategies, flexibility, and downside protection. 

As India’s macro narrative stays strong, AIFs with active risk management and thematic insights remain compelling vehicles for navigating this maturing bull phase with resilience and discipline.

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 .