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AIFs and mutual funds are complementary. The objective of a traditional mutual fund is to beat the benchmark while AIFs focus on absolute returns rather than hugging the benchmark.
Traditional diversified mutual funds should form the core of the portfolio while AIFs should be a supplement. There are two types of AIFs: traditional long AIFs and the long-short AIFs.
Traditional long only AIFs tend to be concentrated in 20-25 stocks and the focus is on absolute returns and are benchmark agnostic. These funds could potentially deliver higher outperformance.
Long short fund has the flexibiility to bet on companies that do well (long) as well as companies that do poorly (short). It also has the flexibility to vary its equity exposure based on market conditions.
Focus of long short funds is to control volatility and deliver absolute returns with consistency.
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