Invesco India has launched its Summit Equity Long Short Fund (SIF).
While in the mutual fund space, fund managers can react to stock specific negative developments by exiting them if they own them, in this new long short fund, they can now not only exit but also take a short position if they believe the stock is headed sizably lower.
This opens up an additional alpha opportunity for investors using their time tested fundamental research skills, without bringing in any new dimension or skill set into play (like taking short positions based on technical analysis for example).
The long part of the fund will be managed akin to a flexicap fund in terms of no biases towards any cap segments or sectors.
Hiten continues to like private sector banks, select consumer stocks, healthcare, auto and select industrial stocks.
Short positions will be purely tactical and stock specific.
Hiten does not immediately see himself building up large short positions as the market itself is recovering from a 2 year sideways grind. But as and when opportunities present themselves, he is open to actively utilizing this facility.
From an outcome expectation perspective, Hiten says investors should expect this fund to deliver over time incremental alpha over a flexicap fund – primarily due to its ability to opportunistically participate on the short side of select trades.
When compared to a Focused Fund in the MF space, he says that focused funds aim to deliver incremental alpha over flexicap funds from concentrated high conviction portfolios. This increases the risk profile of such funds perhaps more than what a well managed equity long short fund carries.