Alternative Investment Funds (AIFs) put up a fairly robust show during the month of October and most managed to get past standard benchmarks on the returns front, even as the markets correct due to adverse global cues and geopolitical tensions led the indices to lower levels.

The key Category 3 AIF strategies – long-only and long-short – had a sound run in October. Long-only strategies invest in domestic companies that are listed in the exchanges. They are allowed to follow any investment strategy without any constraints. 

In October, 44 of the 56 (nearly 8 in 10) category 3 long-only funds managed to outperform the Nifty 50 TRI and an equal number delivered better returns than the BSE 500 TRI. 

The long-short category’s performance was even better in the month as 20 of the 21 funds managed to outperform the Nifty 50 TRI and all 21 delivered higher returns than the BSE 500 TRI. During the month, the Nifty 50 TRI delivered -2.74%, while the BSE 500 TRI gave -2.86%. Long-only funds gave -1.36% on average in October. The long-short funds ended almost in the neutral zone with 0.01% returns on average during the month.

While close-ended funds did better in the long-only segment, open-ended strategies dominated the top performers’ list in the long-short category.

Top 10 long-only performers 

The top long-only funds recorded a strong month and delivered considerable outperformance over standard indices. These strategies gave 3-9 percentage points more than the Nifty 50 and BSE 500 in October.

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.

Leading the list was the Rational Equity Trust’s Rational Equity Flagship Fund I, with 5.86% returns during October. The fund follows a sector-agnostic and flexi-cap approach to stock selection.

Next in the pack was Motilal Oswal AMC’s Growth Anchors Fund - Series 2 with 3.74% returns in the month. The fund invests with the twin objectives of capital appreciation and capital preservation.

Third on the list was Nippon India’s The Big Switch Scheme – 1 with 3.06% returns in October. The strategy invests in high-growth emerging businesses that are likely to benefit from the shift in business from the unorganised to the organised sector over the next few years. It follows a bottom-up stock-picking strategy.

The next in the charts was the First Water Capital Fund from First Water Capital Advisors with a 2.73% return in October. 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.

Standing fifth was Motilal Oswal AMC’s Growth Anchor Fund with 2.61% returns in the month.

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

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

October was a healthy month for these funds. While 20 of the 21 funds in the category outperformed the Nifty 50 TRI, the entire pack of 21 did better than the BSE 500 TRI during the month. 

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

Vasisth Capital’s Vasisth Relative Value Fund topped the chart with 2.53% returns in October. The fund aims to derive alpha by well-defined risk management via trading in derivatives.

Pluswealth Assets AIF from Pluswealth Capital Management occupied the second position, recording 2.27% returns in October. 

Alphagrep Investment Management’s Alphamine Absolute Return fund came third in the list with a 2.14% return during the month. The strategy follows quantitative investment strategies and follows a rules-based framework to analyse data.

Neo Asset Management’s Neo Treasury Plus fund was fourth during the month with 1.14% returns.

Pace 360 Investment Trust came fifth with 1.03% returns during the month. The strategy invests in a mix of asset classes – equities, fixed income, commodities and currencies.

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

Summary 

For investors, long-only and especially long-short fund strategies managed to put behind a lukewarm September and deliver better performance in October. Most funds in both categories managed to outperform the Nifty 50 and BSE 500, which is a positive development.

The fall of indices in October had more to do with the action of the bond markets globally, rather than any fundamental factor here. In the US, Treasury yields rose to 5% levels before cooling off and naturally FIIs and FPIs pulled out money chasing high risk-free returns on offer.

But yields have cooled off in the US and even in India and the inflation trajectory is on a secular downtrend across most large advanced and developing economies, which may lead to less hawkish Central Bank actions globally.

As the festive season ends, healthy consumer spending may result in better earnings prospects for corporate India. Earnings for the second quarter have largely been on expected lines.  Macroeconomic cues are positive, crude oil prices have dipped and there is a bit of a thaw in the Israel-Hamas conflict. For the near term, there is positivity about the directions the markets are likely to take.

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.