ICICI Prudential AMC makes its debut in the SIF space with two fund launches: iSIF Hybrid Long Short Fund and iSIF Equity Ex-Top 100Long Short Fund.
If you are expecting SIFs to rush into shorting strategies to drive higher alpha, Naren says the iSIF range is not for you. iSIF funds will approach naked shorts in a gradual and calibrated manner, as any responsible fund manager ought to – even a fund house like I Pru which has demonstrated capabilities at scale in deploying derivatives within its hybrid MFs over the years.
The new iSIF Hybrid Long Short Fund has a much wider range of equity allocation than a typical BAF – it can go from as low as -7.5% to as high as 75%. Expect this product to be on a month-on-month basis more volatile than their BAF, but expect potentially better long term outcomes due to not only greater flexibility in equity allocations, but also participation in debt, REITs and InvITs.
The new iSIF Equity Ex-Top 100 Long Short Fund responds to a huge investor need of participating in the potential long term upside from small and midcaps (SMID) but with lower levels of volatility. A wider range of derivative tools together with allocation of the residual 35% in a combination of large caps and debt as required can deliver smoother outcomes from the SMID space than what SMID MFs can.
The biggest issue of investor participation in the SMID space is that money comes in when SMIDs are in high momentum – which is when one should be getting incrementally cautious rather than bullish. This results in unsatisfactory investor outcomes. Very little money actually comes in when SMIDs look attractive from a valuation perspective.
His team will endeavour to manage the new iSIF Ex-Top 100Long Short Fund in a manner that plays defense when valuations are not conducive and has the ability to switch to offence very quickly when markets turn favourable for SMID investing.
You have to worry much less about timing your SMID investments when considering this new SIF as compared to investing in small and mid cap mutual funds.
Just like its BAF is positioned as an anytime investment solution in equity markets, this new product can be positioned as an anytime investment solution in small and midcaps for investors who can invest Rs. 10lakhs or more (which is the threshold for all SIFs).