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 a Hybrid Long-Short Fund?
A Hybrid Long-Short Fund is one of the strategy categories defined under SEBI's SIF framework. This strategy maintains a balanced allocation between equity and debt, with mandatory minimum exposures to each asset class. The fund manager must invest at least 25% in equity and equity-related instruments and at least 25% in debt instruments at all times.
The fund can also take limited short positions through exchange-traded derivative instruments across both equity and debt, subject to SEBI's regulatory limits, to enhance returns and manage portfolio risk.
In Simple Terms
The fund maintains a balanced mix — at least 25% in stocks and at least 25% in bonds — and can also take limited short positions in both to potentially profit from declining markets or hedge risks.
What Makes This Strategy Different?
The Hybrid Long-Short Fund offers a balanced approach by mandating minimum allocations to both equity (25%) and debt (25%), ensuring diversification across asset classes while allowing tactical flexibility in the remaining portfolio. The ability to take short positions in both equity and debt provides additional tools for risk management and return generation.
The fund takes long positions (purchases) across:
- •Equity and equity-related instruments (minimum 25%)
- •Debt securities — government, corporate, money market (minimum 25%)
- •REITs and InvITs (as permitted)
- •Commodity derivatives (as permitted)
At least 25% must be in equity and at least 25% must be in debt at all times.
The fund can take short positions via derivatives on:
- •Equity indices and individual stocks
- •Interest rate instruments (debt derivatives)
- •Commodity derivatives
Maximum unhedged short exposure: 25% of net assets (combined across equity and debt), as per SEBI regulations.
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 25% of net assets must remain invested in equity and equity-related instruments at all times.
At least 25% of net assets must remain invested in debt instruments at all times.
Short exposure (combined across equity and debt) taken via derivatives for purposes other than hedging is capped at 25% of net assets.
The combined gross exposure of all positions (long and short) is capped at 100% of net assets as per SEBI's SIF regulations.
How is This Different From Active Asset Allocator Long-Short Fund?
The Hybrid Long-Short Fund maintains mandatory minimum allocations (25% equity, 25% debt), ensuring balanced exposure. The Active Asset Allocator Long-Short Fund has no fixed allocation floors, allowing complete flexibility across asset classes. Both permit up to 25% unhedged short exposure.
Note: The exact positioning, investment approach, and risk management framework for each strategy will be specified in the Investment Strategy Information Document (ISID).
Illustrative Allocation Scenarios
The following are hypothetical examples to illustrate how the fund manager might allocate capital within SEBI's requirements. Actual allocations are determined by the fund manager and will vary over time.
Scenario A: Moderate Market Environment
Scenario B: Equity-Tilted Allocation
Scenario C: Debt-Tilted Allocation
Note: The above scenarios are illustrative only and do not represent actual portfolio allocations of any fund. Actual allocations are determined by the fund manager based on market conditions, investment strategy, and SEBI regulations. All scenarios comply with minimum 25% equity and 25% debt requirements.
Liquidity and Structure
Under SEBI's framework, the Hybrid 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
Dynamic asset allocation and the ability to take short positions through derivatives do not guarantee lower risk or capital protection. Short positions can result in losses if the underlying instruments move against the fund's position. Each asset class carries its own risk characteristics. Investors should carefully read the Investment Strategy Information Document (ISID) of the specific strategy before investing.
Category: Hybrid SIF strategy
SEBI Framework: Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/26 dated February 27, 2025
Minimum Equity: 25% of net assets
Minimum Debt: 25% of net assets
Permitted Asset Classes: Equity, Debt, REITs, InvITs, Commodity Derivatives
Short Exposure Limit: Up to 25% of net assets (unhedged, via derivatives in equity and debt)
Structure: Open-ended or interval
Minimum Investment: ₹10 lakh per investor across all SIF strategies of the AMC