Alternative Investment Funds (AIFs) are thriving even in volatile and falling markets. Their performance in August is evidence of their resilient showing. During the month, category 3 long-only funds delivered robust returns. There are two key Category 3 AIF strategies, long-only and long-short. The long-only funds invest in domestic listed companies and have a transparent structure, without any restrictions on the investment universe or mandates for specific allocation patterns.

In August, as many as 60 of the 61 category 3 long-only funds managed to outperform the Nifty 50 TRI convincingly. When the BSE 500 TRI is taken as the benchmark, as many as 58 long-only funds (more than 95%) outperformed the index during the month.

The long-short category’s performance, too, was healthy when compared to the Nifty 50 TRI during the month. In August, all the 20 long-short strategies exceeded the benchmark in terms of returns. When compared to the BSE 500 TRI, 13 funds outperformed the benchmark.

We had the Nifty 50 TRI delivering -2.31% in August, while the BSE 500 TRI gave -0.61% during the month.

Long-only funds gave 2.29% on average during the month of August. However, long-short funds delivered 0.14% on average during the month, though it is still creditable given the decline in the markets.

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

Top 10 long-only performers 

Long-only funds, especially the best-performing ones, had an excellent run in August despite weak market conditions. These strategies delivered mid to high single-digit returns, even as the frontline indices turned negative during the month.

We had 6 long-only funds in the top 10 that were open-ended, while the remaining four were close-ended.

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

At the top of the performance chart was the ACE fund from Prudent Equity with 9.68% returns during the month. The fund is open-ended and invests in value-oriented growth companies and is focused mostly on small and midcap companies.

Second on the list was First Water Capital Fund from First Water Capital Advisors with a 6.93% return in August. It is close ended. The AIF invests with a value-centric approach and holds a concentrated portfolio, with a time horizon of 5-7 years.

Samvitti Capital’s Alpha Fund came third with 6.90% returns during the month. 

Aequitas Equity Scheme -1 was fourth in the charts and gave 6.78% returns during the month. It is an open-ended fund. 

Ampersand Capital Trust’s Growth Opportunities Fund Scheme -1 was the fifth with 6.6% returns. The AIF invests in a market capitalization agnostic portfolio of 25-30 stocks.

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 August are depicted below.

Top 5 long-short funds

In terms of flexibility and strategies that are allowed, Long-short funds in the AIF category 3 have considerable leeway. They deploy hedging and complex derivative strategies to ensure superior returns for investors.

August was a reasonable month for these funds. All 20 funds in the category outperformed the Nifty 50 TRI, as mentioned earlier. But only 13 of the 20 AIFs in the segment beat the BSE 500 TRI during the month.

The top five long-short AIF schemes are as depicted below. All five are open-ended schemes.

Pluswealth Assets AIF from Pluswealth Capital Management came on top, recording 2.14% returns in August.

Dolat Capital Market’s Dolat Absolute Return AIF was second on the list during the month with 2.05% returns. The fund takes long, short, and intra-day positions, apart from exploring arbitrage opportunities in various securities by deploying sophisticated trading strategies.

Pace 360 Investment Trust came third with a 1.47% return in August. The fund invests in equity, fixed income, commodities, and currencies.

Closely following in fourth place was Neo Treasury Plus Fund from Neo Asset Management, again, with 1.47% returns during the month.

Volvin Growth Fund – Active Rabbit was fifth on the list, with 1.37% returns delivered during the month. This AIF is similar to a diversified equity fund. It is passive but uses derivatives for hedging or for booking profits in the markets using the covered call strategy.

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

For investors, long-only funds have continued their strong run from the previous month into August as well. The top 10-15 long-only AIFs have done especially well by massively outperforming the benchmarks.

On the macro front the US Federal Reserve, though not hiking rates, has sounded hawkish on the interest rate front. It has indicated one more hike this year as inflation increased marginally in August. Treasury yields continue to surge uncomfortably.

The ECB continued with its rate hikes, taking interest rates to record levels. Therefore, for the foreseeable future, the fight against inflation is set to continue. More so as crude prices have risen sharply amidst supply cuts. Brent Crude has gone past $92 a barrel and remains a key risk for stoking inflating.

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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.