Amidst reasonably rallying markets in September, Alternative Investment Funds (AIFs) put up an average fare. Two key Category 3 AIF strategies include long-only and long-short. The long-only strategies invest in local listed companies. They do not have any constraining mandates and are free to adopt any investment style and asset allocation pattern.

In September, only 27 of the 61 (more than 4 in 10) category 3 long-only funds managed to outperform the Nifty 50 TRI. When the BSE 500 TRI is taken as the benchmark, only 26 long-only funds outperformed the index during the month. 

The long-short category’s performance was below-par in September. Only 3 funds managed to outperform the Nifty 50 TRI during the month. When compared to the BSE 500 TRI, again, only 3 funds outperformed the benchmark.

In September, the Nifty 50 TRI delivered 2%, while the BSE 500 TRI gave 2.11%.

Long-only funds gave 1.46% on average during the month. However, long-short funds delivered a lower return of 1.18% on average in September.

A mix of strategies figured among the top performers in the long-only segment.

Top 10 long-only performers 

The top long-only funds did an excellent job of delivering index outperformance in September. Most of the top 10 funds gave about twice or higher returns than that of the Nifty or BSE 500. 

As many as 8 of the top 10 long-only funds were close-ended and only two were open-ended. 

Here is the list of the top 10 funds in the category 3 long-only funds segment

Topping the charts was the First Water Capital Fund from First Water Capital Advisors with a 5.49% return in September. It is a close-ended strategy. The AIF takes the value style of investing. It holds a concentrated portfolio of stocks, with a time period of holding that lasts 5-7 years.

The second position was taken by 360 One Asset Management’s Turnaround Opportunities Fund with 4.87% returns during the month. This fund invests in pre-IPO opportunities and is open-ended.

The third on the list was Nippon India’s Reimagine India Opportunity-7 fund with 4.56% returns in September. This fund invests via a bottom-up approach that seeks to benefit from the emerging trends in India that hold immense potential in the future.

The fourth place was the Abakkus Diversified Alpha Fund, a close-ended strategy, from Abakkus Asset Manager with 4.3% returns in the month.

Aequitas Equity Scheme -1 was fifth in the charts and gave 4.01% returns during the month. It is an open-ended fund. 

The category average and the comparison with standard indices are presented below.

The performance of the top 10 long-only funds and the comparison with Nifty 50 TRI and BSE 500 TRI for September are depicted below.

Top 5 long-short funds

Long-short funds have a lot of space to explore opportunities and are allowed to have complex hedging and derivative strategies to ensure superior returns for investors.

September was a relatively dull month for these funds. Only three of the 20 funds in the category outperformed the Nifty 50 TRI. And only 3 did better than the BSE 500 TRI during the month.

The top five long-short AIF schemes for the month of September are depicted below. All five are open-ended schemes.

Whitespace Alpha’s Whitespace Fund 1 – Equity Plus topped the list with 2.94% during September. The fund takes to index and statistical modelling methods to deliver returns via plain vanilla and other derivative strategies.

Dolat Capital Market’s Dolat Absolute Return strategy was second in the list during the month with 2.59% returns. The fund takes long, short and intra-day positions, apart from exploring arbitrage opportunities in various securities by deploying sophisticated trading strategies.

Edelweiss Asset Management’s Alternative Equity Scheme came third during the month with 2.3% returns.

ITI Long Short Equity Fund came fourth in September with 1.73% returns. The fund is fundamentally driven in its stock-picking approach and does so on both the long and short sides.

Pluswealth Assets AIF from Pluswealth Capital Management occupied the fifth position, recording 1.61% returns in September. 

The performance of long-short funds in the month of September and the comparison with benchmarks are presented below. 

Summary 

For investors, long-only and especially long-short fund strategies had an underwhelming September with most funds not managing to get past standard index benchmarks. This was in staunch contrast to August when most if not all outperformed indices comfortably.

For markets, the news of yield spikes on treasuries and government securities across the globe due to hawkish central banks continues to weigh on sentiments. In the US, Treasury yields rose to 5% levels over the past several weeks, which are multi-decadal highs. The ECB hiked rates to record levels. At some point over the next few quarters, the high rates are expected to bring down growth and reduce consumer spending in the advanced economies.

In India, the macroeconomic situation seems quite strong though with growth still intact and key metrics such as PMI, IIP etc. continuing to surge. But the fight against inflation is set to continue. The new geopolitical tensions in West Asia have added to the woes and crude prices may surge.

FIIs are continuing to sell, though DII support is cushioning the markets from any serious fall. As corporate results wind up for the quarter, with most segments reporting healthy numbers barring IT and select banks, markets may view the earnings favourably.

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.