SBI MF says Hybrid Long Short SIFs can be bigger than balanced advantage funds in three years

SBI Mutual Fund has launched Magnum Hybrid Long Short Fund, its first product under SEBI’s Specialized Investment Fund (SIF) framework, through a New Fund Offer (NFO), which will open from October 1.

SIFs are a new category of investment vehicles that bridge traditional mutual funds and alternative investment strategies like PMS or AIFs, offering flexibility, transparency, and tax efficiency. They have a minimum ticket size of Rs 10 lakh.

Highlighting the long-term potential of SIFs, DP Singh, Deputy MD & Joint CEO at SBI Mutual Fund sounded very bullish on the prospects of the category during a press meet at the NFO launch “…if I put a number three year down the line it (Hybrid Long Short) will be bigger than other similar hybrid funds, the balance advantage (funds) where the assumptions are same, the tax laws continue to be the same, and the other things which are there in the equation.”

The fund would work for retirees as well as first-time equity investors seeking lower volatility and FD-plus returns, said Singh. “People are putting money today in equity or conservative funds, but the volatility of equities is not mitigated. Even 25-30 percent exposure can hit very hard in a market downturn. Here, with derivatives like covered calls, that risk is significantly reduced,” he added.

DP Singh said the tax efficiency, liquidity and predictability of returns are key attraction for investors. “Investors want better tax efficiency, higher than banking returns, and limited volatility. If I had to write my own cheque, I would write it. That is the conviction we have.”

During the NFO phase, SBI MF aims to reach 20,000–30,000 investors, prioritizing education and merit-based adoption over aggressive marketing. “We want people to invest because of the merits of the product, not simply because it is a new launch,” DP Singh said during the NFO launch.

The fund is designed to deliver FD-plus returns with low volatility, combining equity, debt and derivatives. The gross equity exposure will range between 65-75 percent, largely hedged using derivatives to keep net equity exposure at 0-10 percent, while debt, REITs, and InvITs will make up 25-35 percent of the portfolio.

Gaurav Mehta, Head – SIF at SBI MF explained the fund’s derivative strategies. “Through covered calls, protective puts and collars, we aim to earn premiums, protect against downside, and limit extreme swings. Covered calls involve selling options on stocks you hold to earn income, while protective puts act like insurance against sharp falls. Collars combine both – we buy a put to protect downside and sell a call to earn premium, capping both losses and excessive gains. This allows us to reduce volatility rather than increase risk.”

The fund will operate within a universe of around 200 F&O stocks, primarily large and midcap names with strong fundamentals and liquidity. The AMC is targetting an expense ratio of roughly 10 percent of expected yields, ensuring investors retain more of their returns and the fund remains cost efficient.

DP Singh added that the category is ‘highly scalable’. “Investors across cities – small or big – have access to the same data and distribution networks. Once we walk the talk and deliver on what we promise, adoption will follow automatically,” he said, highlighting the fund’s conservative positioning, and recommended a minimum horizon of 18-24 months to fully benefit from tax efficiency and FD-plus returns.

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