How SIFs fared against mutual funds and indices: Did hybrid SIFs balance growth and downside protection?

Specialised Investment Funds (SIFs) have shown promise in protecting investors from market falls, with hybrid strategies emerging as a standout. However, their first year of performance is not enough to establish whether they can consistently outperform conventional mutual funds.

The SIF industry has grown to Rs 38,224 crore across 17 asset management companies (AMCs) in 12 months. Nearly two-thirds of the money is invested in hybrid SIFs, suggesting investors are looking for strategies that can limit losses while participating in market gains.

Data from Ionic Wealth, as of October 15, 2026, show that hybrid long-short SIFs fell 3.1 percent during the market decline between January 2 and March 30. In comparison, balanced advantage funds fell 7.8 percent, multi-asset funds declined 6.1 percent and the Nifty 50 dropped 15.2 percent.

This means hybrid SIFs captured just 21 percent of the Nifty 50’s fall, compared with 51 percent for balanced advantage funds. In simple terms, hybrid SIFs lost less when the market declined.

Did hybrid SIFs give up gains to protect against losses?

The protection came with a trade-off during the subsequent recovery, between March 30 and August 3. Hybrid long-short SIFs gained 8.9 percent, compared with 10.1 percent for balanced advantage funds and 9.1 percent for multi-asset funds.

Hybrid SIFs captured 82 percent of the market’s upside, against 93 percent for balanced advantage funds and 83 percent for multi-asset funds. Their performance suggests that they managed to limit losses while still participating in the recovery, although they did not capture as much of the rebound as balanced advantage funds.

“Hybrid SIFs took 21 percent of the downside while keeping 82 percent of the upside, against balanced advantage at 51 percent and 93 percent and multi asset at 40 percent and 83 percent. Investors are also taking note of this, with hybrid absorbing the bulk of SIF flows. That said, treat it as a fund call rather than a category call. Equity ranges and fund positioning differs sharply across schemes, over 7 percentage points separated the best and worst hybrid SIF in March alone, so understanding the positioning and risk profile for each fund becomes imperative while looking at them as alternatives,” said Dharmendra Jain, co-founder of Ionic Wealth.

Do equity long-short SIFs protect better than equity mutual funds?

Equity long-short SIFs also limited losses during the market decline. They fell 9 percent, compared with 13.7 percent for flexi-cap funds and 14 percent for large-cap funds. Equity long-short SIFs captured 59 percent of the Nifty 50’s fall, while flexi-cap funds captured 90 percent.

However, they also gained less during the recovery. Equity long-short SIFs returned 12.7 percent, compared with 18.5 percent for flexi-cap funds and 14.5 percent for large-cap funds.

Does this prove that short-selling gives Indian fund managers an advantage? Jain said it was too early to draw that conclusion.

“The period is too short to prove anything. Also it coincided with a period where markets have been volatile with downside bias. So any hedge or shorting would have resulted in better outcomes compared to long only equities. Equity long-short SIFs absorbed 59 percent of the downside against flexi cap’s 90 percent. The protection on the way down, however, may cost lesser participation in the rebound. So, let the category cover atleast one full market cycle before we give a verdict. It is also worth remembering that shorts are capped at 25 percent of net assets and SEBI prescribes no minimum, so some funds barely deploy them,” said Jain.

Short-selling allows a fund to potentially benefit when a security falls in value. However, SIFs have different approaches to using this strategy, which means their performance can vary significantly.

Why did the Equity Ex-Top 100 Long-Short SIF outperform?

The Equity Ex-Top 100 Long-Short SIF gained 13.1 percent year-to-date as of October 15, 2026, ahead of the small-cap mutual fund category’s 11.4 percent return. During the recovery period, it gained 32.9 percent, compared with 27.9 percent for small-cap funds and 21.9 percent for mid-cap funds.

However, this performance needs to be viewed carefully. Jain said, “Only one Equity Ex-Top 100 SIF existed at the start of the year, so the category row is effectively a single fund. So as of now, it’s more of a fund result, not a category finding. One should wait for more funds to be launched and performance to be measured in due course.”

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What should investors consider before investing in SIFs?

SIFs offer investors another way to access market-linked strategies, including long-short approaches that can potentially reduce losses during market declines. The early numbers suggest that hybrid SIFs have managed this trade-off particularly well, retaining much of the market’s upside while limiting their downside.

However, the data cover a limited period, and market conditions have favoured strategies designed to protect against declines. Results could look different in a sustained bull market or across a complete market cycle.

Investors should also remember that performance varies across individual schemes. Before investing, they should examine a fund’s strategy, equity exposure, use of short positions, costs and risk profile rather than relying only on category averages.

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