Bull markets propel 58 of the 63 category 3 long-only AIFs outperform the Nifty 50 in November

Equity markets zoomed ahead in November as some of the concerns surrounding the rise in global treasury yields and escalating geopolitical tensions abated. There was broad market participation as the frontline blue chip, as well as mid & small cap indices, rallied.

Category 3 long-only Alternative Investment Funds (AIFs) put up a fairly robust show during the month and most managed to get past standard benchmarks on the returns front. But the long-short segment demonstrated a rather indifferent performance during the month.

Long-only strategies invest in Indian firms that are traded in the BSE and NSE. They are given the flexibility to choose any investment strategy and do not have any rigid market cap mandates.

In November, 58 of the 63 (more than 9 in 10) category 3 long-only funds managed to outperform the Nifty 50 TRI, while 40 strategies (more than 6 in 10) delivered better returns than the BSE 500 TRI.

The long-short category’s performance was below par in the month as only 4 of the 24 funds (one in 6) managed to outperform the Nifty 50 TRI, and only 2 delivered higher returns than the BSE 500 TRI.

During the month, the Nifty 50 TRI delivered 5.6%, while the BSE 500 TRI gave 7.06%.

Long-only funds gave 8.03% on average in November. The long-short funds ended the month on a weak note with 2.95% returns on average.

In keeping with earlier months, close-ended funds did better in the long-only segment, even as open-ended strategies dominated the toppers’ chart in the long-short category.

Top 10 long-only performers

In November, the best of long-only funds recorded spectacular returns and sharply outperformed standard indices. These strategies gave 2-4 times the returns recorded by the Nifty 50 and BSE 500 in the month.

As many as seven of the top 10 long-only funds were close-ended, while the remaining three were open-ended.

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

Taking the top slot was the Malabar Value Fund from Malabar Fund Managers with a whopping 21.64% returns during the month.

The ACE fund from Prudent Equity took the second place with 14.38% returns in November. This fund follows a GCP model that involves buying companies that are growing fast, are available at attractive valuations and can be entered into at the right price. It has two-thirds of its portfolio in small cap stocks.

Ampersand Capital Trust’s Growth Opportunities Fund Scheme -1 took the third spot with 12.36% returns during the month. This scheme believes in the strategy of ‘Right Stock, Right Time and Right Size’ while shortlisting stocks.

Unifi Capital’s Unifi AIF BCAD took fourth place, with an 11.52% return in November. The find follows a bottom-up stock selection strategy by combining qualitative and quantitative factors.

Samvitti Capital Private Limited’s Alpha Fund came fifth with 11.04% returns during the month. The fund looks to deliver absolute returns by positioning itself on both the long and short sides of the markets.

The category’s performance vis-à-vis the Nifty 50 TRI and BSE 500 TRI are depicted below.

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

Top 5 long-short funds

By using complicated strategies across derivatives and equities, long-short funds have considerable leeway in deciding the right approach while chasing returns with low volatility.

November turned out to be a below-par month for these funds as the segment gave just 2.95% on average. As indicated earlier, only 4 funds outperformed the Nifty 50 TRI and just 2 went past the BSE 500 TRI, during the month.

The top five long-short AIF schemes for November are depicted below. Except for the Edelweiss fund, all the others were open-ended schemes.

ITI’s Long Short Equity Fund took the first position with 7.98% returns during November. The fund is driven fundamentally and stocks are picked on the long and short sides.

Nuvama Enhanced Dynamic Growth Equity Fund came second with a 7.17% return in the month. The fund seeks to cushion downfalls and provide alpha over the long term.

Edelweiss Consumer Trends Fund took the third spot with 7.03% returns in November.

Whitespace Fund 1- Equity Plus was fourth in the month and recorded 6.4% returns. The fund aims to capture the Nifty 50’s returns but with lower volatility by generating alpha in the futures & options space.

ICICI Prudential Enhanced Dynamic Fund came fifth with 5.22% returns in November.

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

Summary

As the clouds of uncertainties on the global and local macroeconomic front faded away, markets came bouncing back in November after a volatile October. Inflation is firmly under control both locally and in most advanced economies, Central banks are increasingly turning dovish and indicating multiple rate cuts by mid or late 2024. For corporate India, the earnings season was quite healthy for most segments and the trajectory continues to be upwards. The GDP growth was well above expectations in the second quarter of FY24 and metrics such as IIP were also strong in recent months.

Further, State election outcomes were quite favourable and lent a picture of political stability. Though consumption, especially in rural areas, is yet to pick up strongly, other segments such as manufacturing and agriculture are robust.

There are concerns about a new virus in China and surging cases of COVID-19 in Singapore and the US, with a spike, witnessed even in India. However, there are no major alarms as yet and the buoyancy in the market may continue in the immediate future as FIIs also turn buyers.

Note:

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