The Category 3 AIFs performance divide continued in August 2024, with Long-Only Funds delivering 1.89% average gains compared to 0.99% by Long-Short Funds

Category 3 Alternative Investment Funds (AIFs) exhibited a clear performance disparity between Long-Only and Long-Short strategies in August 2024, continuing the trend observed in previous months. Long-Only AIFs posted an average return of 1.89%, comfortably beating the benchmark indices like the BSE 500 TRI (0.96%) and Nifty 50 TRI (1.36%). Furthermore, 56 out of the 70 Long-Only schemes outperformed the BSE 500 TRI, while 46 beat the Nifty 50 TRI. 

In contrast, Long-Short AIFs faced a more subdued performance, with an average return of just 0.99%. Of the 33 Long-Short schemes, only 9 managed to outperform the Nifty 50 TRI, and 18 surpassed the BSE 500 TRI. These figures highlight the ongoing challenges for Long-Short strategies in capturing the same market momentum as their Long-Only peers.

Top 10 Long-Only Performers

In August 2024, several Category 3 Long-Only AIFs distinguished themselves with notable performances. The less-than-one-year-old, Generational Capital Breakout Trust’s Breakout Fund led the pack with a robust 6.36% return, far outpacing both the Nifty 50 TRI (1.36%) and BSE 500 TRI (0.96%) by a big margin. The strategy employed by Generational Capital, focussing on breakout opportunities, proved highly effective in capturing market upside and in sync with its stated objective of above market returns and consistent alpha.

Following closely was Carnelian Asset Management’s 2+-year-old Structural Shift Fund, which delivered a strong 5.55%. This fund’s approach to identifying structural changes in the economy, combined with effective stock selection, has positioned it well for sustained outperformance.

Sunil Singhania-led Abakkus Asset Manager’s Emerging Opportunities Fund - 1 came in a close third with a 5.07% return, focussing on high-growth potential sectors. Girik Wealth Advisors’ Multicap Growth Equity Fund - II and InCred Asset Management’s Emerging Business Fund also posted impressive results, delivering returns of 3.99% and 3.84%, respectively.

These top-performing funds underscore the strength of Long-Only strategies, particularly in the current market environment, where equity-focused approaches are capitalising on sectoral opportunities and company-specific breakouts.

Here are the top 10 performers of this sub-category

Top 10 Long-Short Performers

Long-Short AIFs are alternative investment funds that employ both long and short positions in the market, aiming to generate returns from rising and falling prices. While Long-Short AIFs underperformed in August-2024 relative to their Long-Only counterparts, some funds did manage to achieve solid returns. 

Nuvama Asset Management’s Enhanced Dynamic Growth Equity (EDGE) Fund led the Long-Short category with a return of 2.94%. This fund leverages dynamic equity strategies, capturing market opportunities while limiting downside exposure.

AlphaGrep Investment Management’s AlphaMine Absolute Return Fund followed with a return of 2.50%. This fund capitalises on short-term inefficiencies in the market, offering strong returns despite the broader challenges faced by Long-Short strategies in August 2024.

Edelweiss Asset Management’s Consumer Trends Fund, Swyom Advisors’ India Alpha Fund, and InCred Alternative Investments' Dynamic Equity Asymmetric Returns Fund rounded out the top five, each delivering returns above 2%.

The top-performing long-short funds once again demonstrated the strength of their distinctive strategies, effectively navigating a dynamic market environment.

Despite broader challenges in the equity markets, these funds managed to deliver commendable returns by balancing risk with tactical opportunities. Their ability to generate positive performance, while keeping downside risks in check, underscores the resilience and adaptability of long-short strategies. Investors in these funds have found opportunities for attractive gains, even as market volatility continues to test the broader investment landscape.

Here are the top 10 performers of this sub-category

The category’s performance compared to benchmark indices is depicted below

Other AIFs Performance

In August 2024, Category II AIFs, particularly those focused on debt, continued to exhibit strong performance. 

Vivriti Asset Management’s nearly 3-year-old Emerging Corporate Bond Fund led the pack, delivering a notable 13.75% return, showcasing its ability to tap into corporate credit opportunities effectively. In doing so, it even beat the Long-Only best AIF performers this month.

Northern Arc Investment Managers also saw robust returns, with their 7+-year-old IFMR Fimpact Long Term Credit Fund gaining 12.52%, and the 4+-year-old Income Builder Fund Series II securing a solid 10.16% return, demonstrating the sustained appeal of long-term credit strategies. 

Vivriti’s Alpha Debt Fund – Enhanced also posted impressive gains at 10.95%, maintaining its position as a reliable option for investors seeking enhanced returns in the debt space. 

Meanwhile, StepTrade Share Services’ Chanakya Opportunities Fund, focussing on the SME sector, delivered a 9.50% return, highlighting the growth potential in this niche market. 

In contrast, the performance of Northern Arc’s Money Market Alpha Fund at 0.79% and Whitespace Alpha’s Fund 2 – Debt Plus at 0.06% underscored the varied nature of returns within the debt AIF space, with certain strategies facing headwinds in a tighter liquidity environment. 

Overall, the August 2024 performance of Category II debt AIFs reaffirmed their appeal as stable, yield-generating investments, with corporate credit and long-term strategies delivering the strongest returns. Investors in this category continue to benefit from a diversified set of strategies, enabling them to navigate market fluctuations with a steady income stream.

Takeaway

In August 2024, Category III Long-Only AIFs once again outperformed their Long-Short counterparts, delivering double the returns on average. Benefitting from favourable market conditions, Long-Only strategies outpaced key benchmarks, underscoring the significance of targeted stock selection and sectoral allocation. 

While Long-Short funds, with their risk-mitigation strategies, struggled to maintain the same momentum, they remain relevant for investors seeking to balance upside potential with downside protection. However, their underperformance against market indices indicates a need for strategic adaptation in the current environment. 

Beyond Category III, Category II debt-focused AIFs continued to deliver robust returns, particularly in corporate and long-term credit strategies. Some funds showcased strong gains, reinforcing the appeal of fixed-income strategies. These performances highlight the diversity and resilience across the AIF spectrum, with opportunities for attractive returns available to investors with varying risk profiles. 

As market conditions evolve, investors may find value in both equity and debt-focused AIFs, with long-only strategies continuing to shine in the equity space while select debt strategies remain a reliable source of steady income.

Note:

***Post Exp & Tax ; **Post Exp, Pre-Tax; ##Gross returns; ###Post Exp & Pre Perf.Fees & Tax; ^^ Post Exp & Tax and Pre Perf.Fees 

Disclaimer: This Blog is made for informational purposes only and does not constitute an offer, solicitation, or an invitation to the public in general to invest in any of the Funds mentioned. All the Returns mentioned in this blog are provided by the respective asset management companies and may vary based on their reporting structure (Pre-tax, Post-tax, Post-expenses, etc.). PMS Bazaar has taken due care and caution in the compilation of data and information. However, PMS Bazaar doesn’t guarantee the accuracy, adequacy, or completeness of any information. Investors must read the detailed Private Placement Memorandum (PPM), including the risk factors, and consult your Financial Advisor before making any investment decision/contribution to AIF. This Blog has been prepared for general guidance, and no person should act upon any information contained in the document. PMS Bazaar, its affiliates, and their office, directors, and employees shall not be responsible or liable for any investment action initiated. This Blog is intended only for the personal use to which it is addressed and not for distribution.