Seven specialized investment funds (SIFs) focused on mid- and small-cap stocks reported negative returns in September 2026. While veteran schemes like Quant Mutual Fund’s qsif show resilience, newer entrants from SBI and Aditya Birla Sun Life are currently trading below their launch prices. Investors in these high-ticket, long-short equity vehicles should note that hedging strategies do not protect portfolios from broader market corrections.
The specialized investment fund (SIF) sector, specifically strategies focused on mid- and small-cap equities, faced a difficult September 2026. All seven schemes within the 'Equity Ex-Top 100 Long-Short' category reported negative returns for the month, highlighting the challenges of managing smaller-cap stocks even when using hedging strategies. These funds are designed for high-net-worth individuals and typically require a minimum investment of Rs 10 lakh.
Understanding the Long-Short Strategy
The long-short investment strategy involves taking long positions, where the manager bets prices will rise, and short positions, where the manager bets prices will fall. This approach is intended to protect the portfolio from market drops. However, the recent data shows that even with these protections, a sharp correction in the broader market for mid- and small-cap stocks can lead to negative performance.
Quant Mutual Fund’s qsif, which has been in the market since late 2025, continues to be a top performer in the cohort. It reported a 29.23 percent return over the past six months and is the only scheme in the category classified under the Level 4 risk band, while the other six funds are in the higher Level 5 category. This classification generally indicates lower relative risk within the context of these specific products.
New Fund Performance
Newer entries to the market are currently facing a tougher environment. Aditya Birla Sun Life Mutual Fund’s Apex and SBI Mutual Fund’s Magnum, both launched in early September, are trading below their initial Rs 10 net asset value (NAV), with prices at Rs 9.97 and Rs 9.73 respectively. ICICI Prudential’s iSIF, which began operations in February 2026, has struggled to move significantly above its starting NAV, holding at Rs 10.01.
Among the newer schemes, 360 ONE Asset’s Dyna has shown some resilience. Launched in June 2026, it delivered a 10.52 percent return over three months and was the only fund in the peer group to record a positive return of 1.56 percent in the last month. Other established schemes, such as Edelweiss Mutual Fund’s Altiva and The Wealth Company’s WSIF, saw sharper declines of 4.30 percent and 4.07 percent respectively during September.
For investors, these funds offer a complex approach to market participation but come with high volatility. Because these funds must hold at least 65 percent of their assets outside the top 100 listed companies, they are heavily sensitive to movements in the mid- and small-cap segments. Since most funds in this category have been operating for less than a year, the next important update will be how these funds manage their portfolios over full market cycles rather than reacting to short-term monthly volatility.