SIFs vs mutual funds performance in 2026: Equity and hybrid scheme returns, risks compared — what investors need to know

A Specialised Investment Fund (SIF) is a SEBI-regulated investment product introduced in 2025 with a minimum investment of ₹10 lakh. SIFs offer access to specialised strategies that go beyond conventional mutual fund investing.

While mutual funds largely invest directly in stocks and debt instruments, SIFs can use advanced tools such as long-short equity strategies, dynamic asset allocation and unhedged derivatives.

According to an Ionic Wealth study, the first SIF was launched on 25 September 2025. The report compared fund performance across two periods in 2026, including only funds with a track record dating back to 1 January 2026. Since SIFs are relatively new, only 7 schemes had data available from the start of the year.

What are the year-to-date returns of SIFs and mutual funds?

The Ionic Wealth study’s year-to-date (YTD) figures show differences across fund categories as of 15 October 2026. According to the data, the Nifty 50 and Nifty 500 were down 11.7% and 6.9%, respectively.

Balanced advantage funds fell 1.5%, while multi-asset allocation funds gained 0.2%. On the other hand, hybrid long-short SIFs delivered a positive return of 9.6%.

Large-cap and flexi-cap mutual funds were down 6.9% and 1.6%, while equity long-short SIFs declined 1.8%. Mid-cap and small-cap mutual funds returned 1.9% and 11.4%, respectively, while equity ex-top 100 long-short SIFs gained 13.1%.

These three SIF strategies differ in their approach:

• Hybrid long-short SIFs: Combine equity and debt exposure with long-short strategies.
• Equity long-short SIFs: Take long and short positions in equity and equity-related instruments.
• Equity ex-top 100 long-short SIFs: Focus on stocks outside the top 100 by market capitalisation, using long-short strategies.

How have SIFs performed during market rallies and downturns?

According to the Ionic Wealth study, between 2 January and 30 March 2026, when the Nifty 50 fell 15.2%, large-cap and flexi-cap mutual funds recorded downside capture ratios of 92% and 90%, respectively. Equity long-short SIFs recorded a much lower ratio of 59%.

Downside capture measures how much a fund loses relative to the index (Nifty 50) during a market decline. A lower ratio indicates better downside protection.

During the recovery between 30 March and 3 August 2026, when the Nifty 50 gained 10.9%, equity long-short SIFs recorded an upside capture ratio of 117%, compared with 133% for large-cap funds and 170% for flexi-cap funds.

A higher upside capture ratio indicates that a fund captures a larger share of the market’s gains. The findings suggest that equity long-short SIFs offered better downside protection, but captured a smaller share of gains during the recovery.

Why did SIFs perform differently?

According to Ionic Wealth, SIFs can take short positions, potentially benefiting when stock prices fall. This allows fund managers to reduce net market exposure when they expect markets or specific stocks to decline.

“Imagine you believe a stock currently trading at ₹100 is likely to fall. With a conventional long-only investment, there isn’t much you can do with that input. You can choose not to invest in that particular stock, but you cannot directly benefit from its decline. And this is exactly where shorting comes in. Through a short position, a fund manager can effectively gain when stock prices fall.”

However, mutual fund managers cannot take direct short positions and, in many categories, must maintain a minimum allocation to equities at all times.

Are SIFs right for your portfolio?

Ionic Wealth suggests that SIFs need not replace existing mutual fund investments. They could complement a diversified core portfolio as a satellite allocation for investors who understand derivatives, short positions and the risks involved.

They may be worth exploring for investors who can tolerate volatility and potential capital losses and want access to specialised investment strategies.

As with any investment, suitability depends on your financial goals, risk appetite, and investment horizon.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.