After an exceptional FY2024, both long-only and long-short AIFs in India faced a tougher market in FY2025, delivering resilient returns against a challenging backdrop.

Alternative Investment Funds (AIFs) have continued to attract sophisticated investors in India, offering differentiated equity exposure beyond traditional portfolios. FY2025, however, turned out to be a more muted year compared to the highs of the past. The Nifty 50 TRI rose just 6.65%, while the BSE 500 TRI delivered 5.96%, reflecting tepid broad-market gains amidst sectoral churn and rising global uncertainty. In this environment, both long-only and long-short AIF strategies managed challenges and delivered moderate returns. This article explores how these strategies performed in FY2025, with a quick look back at FY2024’s strong performance for important context.

About Long-Only and Long-Short AIFs

Long-only and long-short AIFs offer distinct approaches to equity investing. 

Long-only AIFs primarily invest in stocks with the aim of capturing market growth, benefiting when markets trend upwards. 

In contrast, long-short AIFs combine equity purchases with selective short-selling, aiming to profit from both rising and falling stocks. Their flexible positioning helps manage volatility but may limit upside in strong bull markets. 

Given these structural differences, comparing their performance across periods must account for varying market conditions and strategic intent rather than treating returns as directly comparable.

Despite their different investment styles, both long-only and long-short AIFs ended FY2025 with remarkably similar average returns of 8.7% and 8.68% respectively. This convergence highlights how a challenging and choppy market environment limited the relative advantage of either strategy during the year.

Performance of Long-Only AIFs in FY25

About 70+ long-only AIFs, tracked by PMS Bazaar, delivered an average return of 8.7% in FY2025, a sharp moderation compared to their nearly 50% surge in FY2024. While returns remained positive, the year’s wild swings made alpha generation significantly tougher for equity-focused strategies.

Early in the year, a strong rally propelled markets to record highs by September 2024, driven largely by midcap and smallcap exuberance. However, the momentum reversed sharply in the second half, especially hurting small-cap stocks, which erased much of their early gains before recovering modestly by year-end. Midcaps held up slightly better but still reflected the broader cooling trend.

Sector performance also played a decisive role. Financial services emerged as a key driver with nearly 19% returns, while IT and banking posted mid-single-digit gains. In contrast, sectors like consumer goods, autos, real estate, and PSU banks underperformed, dragging broader portfolios lower.

Given these dynamics, return dispersion across long-only AIFs widened notably. Strategies with heavier allocations to financials and high-quality midcaps fared relatively better, while those exposed to weaker sectors or highly volatile smallcaps struggled to protect capital.

Despite the muted headline number, long-only AIFs outpaced the Nifty 50 TRI (6.65%) and BSE 500 TRI (5.96%), reflecting selective alpha in a challenging year.

Among long-only AIFs, A9 Finsight’s Finavenue Growth Fund led FY2025 with an impressive 46.66% return, followed by Negen Capital’s Negen Undiscovered Value Fund at 33.61%. 360 ONE Asset Management featured prominently with two funds — High Growth Companies Fund (23.48%) and High Conviction Fund Series 1 (20.86%). Strategies from Sundaram, ICICI Prudential, Sameeksha, Generational Capital, Prajana Advisors, and Carnelian Asset Management also featured in the top ten, delivering steady double-digit gains despite a challenging market year.

Here is a table of the top-10 Long-Only AIF performers for FY25.

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

Data as of March 31, 2025 

The top long-only AIF performers of FY2024, many of whom delivered blockbuster 65–97% returns last year, saw sharp moderation in FY2025. Rational Equity Trust’s flagship fund, which soared nearly 98% in FY2024, settled at a modest 11.26% gain in FY2025. Similar trends played out across Prudent Equity, First Water Capital, and Ampersand Capital. In fact, a few funds even posted negative returns, highlighting how dramatically the investing environment shifted between the two financial years.

Performance of Long-Short AIFs in FY25

About 30-odd long-short AIFs, tracked by PMS Bazaar, delivered an average return of 8.68% in FY2025, a notable slowdown compared to the 21.68% category return seen in FY2024. While returns remained positive, the dramatic shifts in market direction during the year posed stiff challenges for these strategies.

The sharp rally through September 2024, followed by a prolonged correction lasting into early 2025, made hedging difficult. Many long-short funds that maintained higher net long exposures benefited early in the year but struggled to defend gains during the sell-off phase. Directionality proved to be a double-edged sword, as rapid trend reversals eroded the tactical advantage of short positions.

Performance dispersion within the category widened considerably. The top quartile of long-short AIFs averaged 16.26% returns, while the bottom quartile managed just 0.8%, highlighting the critical role of active positioning and risk management in volatile markets. Despite the overall moderation, several strategies showcased resilience, navigating one of the most turbulent financial years in recent memory.

Overall, long-short AIFs, with an average return of 8.68% in FY2025, outperformed the Nifty 50 TRI (6.65%) and BSE 500 TRI (5.96%). This showed selective alpha generation in a challenging year.

Swyom Advisors' India Alpha Fund topped the FY2025 long-short AIF charts with a strong 31.79% return, well ahead of peers. ASK’s Absolute Return Fund and Inquant Debt Plus also delivered healthy double-digit gains of over 14%. True Beacon 1, Neo Asset’s Treasury Plus Fund, and Nuvama’s EDGE Fund posted steady 13–14% returns. Alpha Alternatives and AlphaGrep maintained conservative strategies while still delivering respectable outcomes. Altacura AI featured two funds among the top performers, reinforcing its presence.

Here is a table of the top-10 Long-Short AIF performers for FY25.

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

Data as of March 31, 2025 

Key Lessons from FY2025 for AIF Investors

FY2025 offered important lessons for investors evaluating AIF strategies. Long-only AIFs benefited significantly from the strong directional rally seen in the first half of the year. Their ability to ride broad market momentum allowed them to stay ahead, even when volatility re-emerged later.

On the other hand, long-short AIFs, which rely on both upward and downward market moves to generate alpha, found it harder to navigate an environment marked by sharp rallies followed by prolonged declines. Consistent, tradable volatility  not sudden trend reversals remains crucial for these strategies to thrive.

For investors, the takeaway is clear: strategy selection should match individual risk tolerance and investment horizon, rather than simply chasing the best returns of the previous year. FY2025 reinforced the idea that long-only and long-short AIFs serve different roles, each shining under different market conditions.

While FY2025 was a year where long-only strategies surged ahead, smart diversification between long-only and long-short approaches could still hold the key to long-term AIF portfolio success.

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