As many as 111 of 120 strategies delivering positive returns, outperforming key indices

The recent surge in global tariffs has impacted several international markets, but India finds itself in a relatively stable position this time around. Its minimal reliance on US trade flows, coupled with strong internal consumption, has helped buffer the immediate impact. Additionally, declining global prices of crude oil and metals could work in India’s favour by lowering production costs for businesses. The stock market got a whiff of this early.

Amid the uncertain global backdrop, March 2025 saw Indian markets stage a strong comeback. The Nifty50 TRI climbed 6.31%, and the BSE 500 TRI advanced by 7.32%, marking a solid turnaround following a prolonged period of selling. This bullish trend fuelled widespread gains in AIF strategies. PMS Bazaar's data shows that out of 120 AIF strategies tracked in the long-short (35) and long-only (85) categories, a total 111 closed the month with positive returns. 

Several top-performing Category-III long-only funds posted impressive gains of 10–15%, significantly lifting investor portfolio values. Notably,  46 AIFs outpaced the Nifty’s performance, while nearly 30 beat the BSE 500—underscoring the strong alpha within these investment avenues. Here’s a breakdown.

Long-Only AIF Performers

Category III long-only Alternative Investment Funds (AIFs) in India are focussed on generating capital appreciation through equity investments without using leverage or short positions. These funds are professionally managed and aim to outperform benchmarks over the long term, offering investors access to niche, high-conviction strategies in the Indian market.

In March 2025, 85 Category III long-only AIF schemes delivered an average return of 5.59%. While this trailed the BSE 500 TRI’s 7.32% and the Nifty 50 TRI’s 6.31%, a notable number of funds still managed to outperform the benchmarks. Specifically, 20 schemes surpassed the BSE 500 TRI, and 36 outperformed the Nifty 50 TRI. This performance reflects the selective strength within the category, especially as the broader markets rebounded. Although the average return lagged, the dispersion in returns highlights the importance of fund selection, with top-performing strategies significantly outpacing indices and offering meaningful alpha to investors.

Below is a snapshot.

In March 2025, Samvitti Capital’s Alpha Fund led the pack with a remarkable 15.22% return, setting the pace for long-only Category III AIFs. Samvitti Capital’s Alpha Fund delivered strong returns by actively deploying long-only strategies across momentum, arbitrage, special situations, and IPOs, while maintaining the flexibility to move fully into cash during uncertain markets. 

Nepean Capital’s Long Term Opportunities Fund II followed closely with 11.69%, their superior returns stem from spotting undervalued triggers like restructurings, M&As, deleveraging, CEO/ownership changes, and policy shifts before the market prices them in. Backed by deep, bottom-up stock research, a sector-agnostic approach, and a concentrated portfolio of up to 25 high-conviction ideas with strong risk controls, the fund turns overlooked opportunities into long-term outperformance.

While Motilal Oswal’s Founders Fund Series 1 delivered 11.01%. Motilal Oswal Founders Fund delivered superior returns by consistently backing high-conviction founder-led businesses with strong earnings growth and scalable business models, outperforming benchmarks with a disciplined bottom-up stock selection approach.

These results underscore the value of active management and targeted strategies in volatile markets.

Below is a table on the top-10 long-only AIFs in March 2025.

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

Long-Short AIF Performers

Category III long-short AIFs in India employ both long and short positions to generate returns, offering flexibility to profit in rising and falling markets. These funds are designed for sophisticated investors seeking absolute returns, with strategies that may include equity arbitrage, hedging, and market-neutral approaches. Unlike traditional long-only funds, long-short AIFs can reduce volatility and manage downside risk more effectively. Managed by experienced professionals, they operate with fewer regulatory constraints, enabling innovation in portfolio construction. As market dynamics shift, long-short AIFs are gaining traction as a powerful tool for diversification and alpha generation in India.

In March 2025, 35 Category III long-short AIF schemes reported an average return of 2.98%, underperforming both the BSE 500 TRI (7.32%) and the Nifty 50 TRI (6.31%). Only 3 schemes managed to outperform the BSE 500 TRI, while 6 outperformed the Nifty 50 TRI. This indicates that despite the volatility, a few funds were able to generate positive alpha, though the majority faced challenges in matching the performance of the broader market indices during the period.

Do note that Category III long-short AIFs typically outperform long-only peers in volatile or sideways markets. By leveraging short positions, they can profit from falling stocks, while long positions benefit from rising stocks. This flexibility allows them to manage market fluctuations more effectively, offering better downside protection and consistent returns.

Below is a snapshot.

In March 2025, several Category III AIFs delivered strong returns, with Swyom Advisors’ India Alpha Fund leading at 9.58%. Their performance is driven by a sector-agnostic, multi-cap approach backed by deep fundamental research. With 60–80% allocation to strong companies with solid governance and financials, they combine long-term, short-term, and special opportunity strategies to adapt across cycles. Their use of covered call strategies for risk hedging helps generate better risk-adjusted returns in both stable and volatile markets.

Aditya Birla Sun Life’s ABSL India Special Opportunities Fund followed with 8.25%, The ISOP Fund’s outperformance stems from a disciplined, end-to-end investment process starting with a defined universe, followed by rigorous stock screening, risk-reward optimization, and focused portfolio construction of 20–30 high-conviction ideas.

While InCred’s Dynamic Equity Asymmetric Returns Fund generated 8.02%.InCred’s edge lies in its active, dynamic strategy combining 60–80% long cash equities with tactical use of index derivatives. It adapts exposure daily based on market momentum, ramping up in rallies and hedging aggressively in downturns. With the ability to short, deploy advanced F&O strategies, and use up to 200% gross exposure, the fund captures upside efficiently while limiting downside, often realizing just a third to half of index losses in sharp corrections.

Below is a table on the top-10 long-short AIFs in March 2025.

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

April 2025 Outlook for AIFs

Although global trade tensions and elevated market valuations suggest potential volatility ahead, AIF investors should remain optimistic. While the broader equity market may experience some mean reversion, a market collapse is not inevitable. 

India’s corporate sector enters this phase with strong, low-leverage balance sheets, presenting an encouraging environment for long-term growth. Although earnings growth may slow, large-cap stocks continue to show resilience due to solid fundamentals. Small and midcaps are currently facing valuation compression, but this phase often leads to the emergence of future market leaders. Additionally, thematic shifts, such as the realignment of private banks, present selective buying opportunities.

For AIF investors, this period calls for patience and discipline. Those who stick with skilled managers focused on prudent valuation and bottom-up stock selection may reap significant rewards as market conditions stabilize. Each slowdown presents an opportunity to reset and position for the future.

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