Most category III AIFs beat Nifty in October

Most long-only alternative investment funds have outperformed Nifty in the month of October. The former gave average category returns of 1.4 per cent compared with -2.7 per cent for the benchmark, the data from PMS Bazaar for category III AIFs showed. Long-short funds gave average category returns of -0.1 per cent.

Of the 56 long-only funds, 44 managed to beat the Nifty50 returns during the month, while 20 out of 21 long-short funds beat the benchmark.

Rational Equity Flagship Fund I was the best performer in October, with returns of 5.9 per cent. Motilal Oswal’s Growth Anchors Fund Series 2 and Nippon India’s Big Switch Scheme 1 were the other two top performers, with gains of 3.7 per cent and 3.1 per cent, respectively.

For the one-year period, Aequitas Equity Scheme I was the best performer with returns of 82 per cent. First Water Capital Fund and Abakkus Asset Manager’s Emerging Opportunities Fund 1 were the other top performers with returns of 50 per cent and 46.8 per cent, respectively.

Among the long-short funds, Vasisth Relative Value Fund was the top performer in October with returns of 2.5 per cent. For a one-year period, Volvin Growth Fund - Active Rabbit has topped the charts with returns of 23 per cent.

The broader markets S&P BSE Midcap and S&P BSE 250 SmallCap were down by 3.4 per cent and 2.7 per cent, respectively, in October. All sectoral indices declined, except real estate that gained 3.7 per cent. Foreign portfolio investors reported net outflows of $2.9 billion, while domestic institutional investors pumped in $3 billion during the month.

Fed rates

The US Fed left the interest rates unchanged in early November, though it voiced concerns that job gains are still strong, and inflation is elevated. This led to US 30-year yields cooling off a bit to almost 4.64 per cent, triggering a mini risk-on and the dollar weakening. After the initial spike post the West Asia conflict, crude prices too have corrected.

“We expect inflation in the US to cool off materially due to a correction in prices of all commodities as also recent correction in real estate prices. This should allay fears of yields rising from here. Global geopolitical concerns though continue to be a key monitorable,” said Sunil Singhania, founder, Abakkus Asset Manager, in a recent note to investors.

A long-only fund takes only long positions. A long-short fund takes both long and short positions in the market and use several alternative investing techniques such as leverage, derivatives, and short positions to purchase relatively undervalued securities and sell overvalued ones.