Long short strategies – which is what SIFs execute – are very different from traditional long-only strategies. They have an asymmetric return profile by participating to a good extent in market upturns while at the same time drastically reducing drawdowns in market downturns.
Because of this downside protection, long short strategies beat markets over time with a much lower risk profile.
Need for such strategies has increased significantly in a world of heightened geo-political and geo-economic risks and in a market where valuations are not really in comfort zone. The desire to participate in markets but with strong downside protection is higher than ever before – and that’s what equity long short SIFs aim to deliver.
The fundamental difference between balanced advantage funds and equity long short strategies is that BAFs aim to limit downside to some extent through nimble asset allocation between debt and equity while nevertheless being significantly exposed to equity markets. Long short strategies manage downside risk by calibrating long and short positions within equity markets – they can even go to net 0 equity exposure if warranted.
ITI AMC sponsored Diviniti SIF’s new Equity Long Short SIF is being launched on the back of an enviable track record that the fund house has created over 7+ years with its long short AIF. It is perhaps the only equity long short strategy in the market that didn’t drop at all during the 2020 covid crash.
Other significant corrections including 2022 and 2024 have seen this long short fund dropping very marginally in value while markets corrected significantly. Between Jan 23 and Sep 24, market went up 42%, ITI’s long short AIF went up 44%. In the correction that ensued, large caps were down 14% mid/small caps over 20%, their AIF went down only 3%.
As a consequence of downside protection, net results show that from Jan 23 to Mar 25, market has gone up 22%, while their long short AIF has delivered 42%.
Rajesh says the strategy and guardrails that the fund house uses in its long short AIF are broadly in sync with the regulatory framework for SIFs, so he doesn’t expect to have to make any material tweaks in their new equity long short SIF compared to their time tested AIF version.
Rajesh emphasizes that when buying an SIF, you have to consider skill sets and track record of the manager in long short strategies – which is vastly different from long only mutual fund products.
ITI AMC seems to have established its right to win in the SIF space on the strength of its strong track record of over 7 years of delivering high alpha with very low downside risk in its long short AIF.