This is a SEBI-regulated investment strategy category under the Specialized Investment Fund (SIF) framework, introduced vide SEBI circular dated February 27, 2025.
What is an Equity Long-Short Fund?
An Equity Long-Short Fund is one of the three equity-oriented strategy categories defined under SEBI's SIF framework. It invests predominantly in listed equity and equity-related instruments, while also permitting limited short exposure through exchange-traded derivative instruments.
It is the broadest among the equity SIF categories. There is no restriction on market capitalisation — the fund manager can invest across large cap, mid cap, and small cap stocks. There is also no mandatory sector concentration requirement.
In Simple Terms
The fund buys stocks it believes will rise (long positions) and simultaneously uses derivatives to take limited short positions on stocks it believes may fall — all within limits set by SEBI.
How Does the Long and Short Book Work?
The fund purchases equity shares it expects to appreciate in value. This is equivalent to standard equity investing — the fund holds ownership in those companies.
Minimum: 80% of net assets must be in equity and equity-related instruments.
The fund uses derivative instruments (such as stock futures or index derivatives) to take short positions on stocks or indices it expects to underperform. If those positions fall in value, the fund benefits.
Maximum unhedged short exposure: 25% of net assets, as per SEBI regulations.
Note: The above is an illustrative example only. Actual fund allocations are determined by the fund manager within SEBI-defined limits.
What Makes This Category Different From a Regular Equity Mutual Fund?
Regular Equity Mutual Fund
- •Can only take long (buy) positions
- •Fully dependent on market going up to generate returns
- •Minimum investment: ₹500 (most funds)
- •Available to all investors
Equity Long-Short Fund (SIF)
- •Can take both long and limited short positions via derivatives
- •Short book can provide partial offset during market downturns
- •Minimum investment: ₹10 lakh per investor across all SIF strategies of the AMC
- •Regulated under SEBI's SIF framework
Key SEBI Regulatory Parameters
The following parameters are defined in SEBI's SIF framework. Fund managers must operate within these boundaries. Individual strategy documents (ISIDs) may specify tighter limits.
At least 80% of net assets must remain invested in equity and equity-related instruments at all times.
Short exposure taken via derivatives for purposes other than hedging and portfolio rebalancing is capped at 25% of net assets.
The strategy can invest across any market capitalisation — large cap, mid cap, small cap, or a combination.
The combined gross exposure of all positions (long and short) is capped at 100% of net assets as per SEBI's SIF regulations.
Liquidity and Structure
Under SEBI's framework, the Equity Long-Short Fund can be structured as open-ended or interval. The minimum redemption frequency for an open-ended structure is daily.
Important Note on Risk
The ability to take short positions through derivatives does not mean this strategy guarantees lower risk or capital protection. Short positions can result in losses if the underlying instruments move against the fund's position. Investors should carefully read the Investment Strategy Information Document (ISID) of the specific strategy before investing.
Category: Equity-oriented SIF strategy
SEBI Framework: Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/26 dated February 27, 2025
Minimum Equity: 80% of net assets
Short Exposure Limit: Up to 25% of net assets (unhedged, via derivatives)
Market Cap: No restriction
Structure: Open-ended or interval
Minimum Investment: ₹10 lakh per investor across all SIF strategies of the AMC