Selective stock-picking drives resilience and once again shows it is possible to outshine even in amid market downturn

Indian markets witnessed significant volatility in December 2024, with both Nifty 50 TRI (-2.02%) and BSE 500 TRI (-1.5%) finally closing the month in negative territory. Slower earnings growth anticipation in Q3, a weaker Indian currency and global cues took the sheen off equities in the last month of last calendar year. 

Amidst this challenging backdrop, Alternative Investment Funds (AIFs) demonstrated resilience, with Long-Only AIFs outperforming their Long-Short counterparts.

Long-Only AIFs posted an average return of 0.93%, with 63 schemes (79%) of 80 schemes surpassing the Nifty 50 TRI and 55 (69%) exceeding the BSE 500 TRI. Many of these funds benefitted from concentrated portfolios and selective stock-picking strategies that capitalised on emerging market trends. Interestingly, the best performing Long-Only AIF clocked a whopping 56% return in this month (more details below). 

Meanwhile, Long-Short AIFs recorded an average return of 0.19%, maintaining capital protection but lagging behind Long-Only strategies. However, 29 (85%) out of 34 Long-Short schemes outperformed the Nifty 50 TRI, while 27 (79%) exceeded the BSE 500 TRI, highlighting the role of hedging strategies in navigating downside risks.

Top-10 Long-Only Performers

Category-III Long-Only AIFs focus on high-conviction investments to generate capital appreciation. These funds adopt a structured approach, similar to traditional equity investing but with greater flexibility in portfolio concentration.

In December 2024, the average return for the Long-Only AIF category stood at 0.93%, with 55 out of 75 funds beating the BSE 500 TRI and 63 surpassing the Nifty 50 TRI.

Here’s a look at the top 5 performing strategies for the month. Do note apart from equity investments, some of them may have got a good cushion from unutilised cash in their respective portfolio. 

● Aarth AIF – Growth Fund

December 2024 Return: 56.00%

Alpha over Nifty 50 TRI: 58.02%

This fund delivered exceptional returns, fuelled by a highly concentrated portfolio where key holdings nearly doubled in value this month.

● Negen Capital Services – Undiscovered Value Fund

December 2024 Return: 15.84%

Alpha over Nifty 50 TRI: 17.86%

A strong value-based approach, focussing on undervalued stocks with high upside potential, seems to have worked wonders this month.

● Singularity AMC – Equity Fund I

December 2024 Return: 7.50%

Alpha over Nifty 50 TRI: 9.52%

The fund’s AMC was founded to be a value-added operator-minded investor to visionary entrepreneurs building great companies.

● Motilal Oswal AMC – Growth Anchors Fund

December 2024 Return: 5.15%

Alpha over Nifty 50 TRI: 7.17%

Its investment strategy balances risk and reward by dividing the investment portfolio among different types of asset classes.

● A9 Finsight – Finavenue Growth Fund

December 2024 Return: 4.97%

Alpha over Nifty 50 TRI: 6.99%

This is a sector-agnostic investment fund focussed on capitalising on growth opportunities across various industries.

Top-10 Long-Only AIF Performers (December 2024)

The Long-Only AIF category’s performance compared to benchmark indices is shown below:

These results highlight the ability of Long-Only AIFs to generate strong alpha despite market declines. It also showcased the impact of selective stock-picking and active portfolio management.

Top-5 Long-Short Performers

Category-III Long-Short AIFs leverage both long and short positions to generate market-neutral returns. These funds mitigate downside risks while capitalising on opportunities across different market conditions.

In December 2024, Long-Short AIFs delivered an average return of 0.19%, with 29 out of 34 funds outperforming the Nifty 50 TRI and 27 surpassing the BSE 500 TRI.

Here’s a look at the top 5 performing strategies for the month:

● SBI Funds Management – Optimal Equity

December 2024 Return: 2.80%

Alpha over Nifty 50 TRI: 4.82%

Its portfolio net allocation to equities is determined by an asset allocation framework. The long-only strategy of the equity is a concentrated portfolio, investing in high conviction ideas. Additionally, derivatives strategy is used to manage fund with lower volatility. 

● InCred Alternative Investments – Liquid Alternative Fund-I

December 2024 Return: 2.18%

Alpha over Nifty 50 TRI: 4.20%

The fund seeks to generate alpha independent of market volatility and directionality. It intends to use long-short strategies across futures, options, and special situations for diversification.

● Nuvama Asset Management – Multi Asset Strategy Fund

December 2024 Return: 2.02%

Alpha over Nifty 50 TRI: 4.04%

This is an absolute return investment vehicle targeting superior post-tax yield over traditional debt options over a 12 month + horizon, with reduced volatility. This is a yield-oriented approach, with an aim to offer returns through low-risk and low-exposure strategies across uncorrelated / low correlation asset classes to smoothen out volatility. 

● Helios Capital – India Long Short Fund

December 2024 Return: 1.89%

Alpha over Nifty 50 TRI: 3.91%

This is a fund investing in equities and equity derivatives including futures. It is typically leveraged through the use of derivatives.

● Pluswealth Capital Management – Pluswealth Assets LLP

December 2024 Return: 1.61%

Alpha over Nifty 50 TRI: 3.63%

Blends long-term equity positions with tactical short trades to hedge risk and deliver returns by strictly sticking to mathematical and statistical methods.

Top-5 Long-Short AIF Performers (December 2024)

The Long-Short AIF category’s performance compared to benchmark indices is shown below:

These results highlight the role of Long-Short strategies in risk mitigation, though Long-Only funds delivered better overall returns in December 2024.

Conclusion

December 2024 proved challenging for markets, but AIFs demonstrated their ability to navigate volatility effectively. While Long-Short funds provided downside protection, Long-Only AIFs capitalised on selective bets to outperform significantly.

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.