Summary:
Hybrid long-short SIFs are attracting investors as a flexible alternative to arbitrage and balanced advantage funds. SIF assets rose 29% to ₹17,858 crore in June 2026, with hybrid strategies accounting for nearly 72% of total AUM. These funds combine equity, debt, arbitrage and derivatives to adapt to changing market conditions, though they remain suited for investors with a minimum investment of ₹10 lakh and a higher risk appetite.
Hybrid long-short strategies under the newly introduced Specialised Investment Fund framework are gaining investor attention as an alternative to conventional arbitrage and balanced advantage funds. The appeal comes from their ability to combine equity, debt, arbitrage and derivative strategies while allowing fund managers greater flexibility to adjust exposure according to market conditions.
Total assets managed by SIFs increased 29% month-on-month to ₹17,858 crore in June 2026, compared with ₹13,814 crore in May. Net inflows jumped 171% to ₹3,782 crore from ₹1,396 crore during the same period, highlighting growing investor interest in the relatively new category.
Hybrid Strategies Dominate SIF Assets
Hybrid investment strategies accounted for around 72% of total SIF assets, with AUM of approximately ₹12,822 crore at the end of June. Within this, hybrid long-short funds alone managed around ₹11,910 crore, representing nearly 67% of the overall ₹17,858 crore SIF industry. Hybrid long-short funds also received around ₹2,043 crore of inflows in June, up 189% from ₹707 crore in May.
Despite this rapid growth, SIFs remain much smaller than established categories. The arbitrage fund industry manages roughly ₹3.44 lakh crore, while balanced advantage funds hold around ₹2.54 lakh crore.
Take a look at Hybrid SIF Long Short Funds
What Makes Hybrid Long-Short SIFs Different?
Traditional arbitrage funds primarily seek to capture pricing differences between the cash and futures markets. Balanced advantage funds dynamically shift between equity and debt depending on valuations and market conditions.
Hybrid long-short SIFs have a wider toolkit. Fund managers can combine debt, long equity positions, arbitrage opportunities and limited short positions through derivatives. Some strategies can also take directional positions or participate in special situations, giving managers greater flexibility to generate returns across different market environments.
Under the SIF framework, the normal minimum investment threshold is ₹10 lakh, making these products primarily suitable for investors with larger portfolios and a greater understanding of market risk.
How Have Hybrid SIF Returns Compared?
Early performance has varied substantially. Over a recent six-month period, one hybrid long-short SIF delivered around 9.87%, while other prominent strategies generated approximately 6.19%, 5.85%, 3.33% and 1.45%.
For comparison, a large arbitrage fund generated around 3.75% during the same period, while a major balanced advantage fund returned approximately 0.46%. However, the comparison needs caution because most SIFs have only recently been launched and six months is too short a period to judge consistency across market cycles. Current industry analysis also notes that meaningful long-term performance comparisons are not yet possible.
What is SIF and the Gap it Fills
Tax Treatment Adds to the Appeal
Taxation can also influence investor preference. Equity-oriented strategies can attract 20% short-term capital gains tax and 12.5% long-term capital gains tax, depending on their classification and holding period. For hybrid strategies, the exact tax treatment depends on underlying asset allocation, making it important for investors to check the individual scheme structure rather than assuming all SIFs receive identical treatment.
