Long-short funds: Check if shorting aims to cut risk or boost returns

Invest only if you are clear about the fund's strategy, risks, and role in your portfolio

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These funds offer greater flexibility than traditional mutual funds, which are long-only and gain only when prices rise. In falling markets, they either stay out or decline alongside. (Photo: Shutterstock)

Sanjeev Sinha

4 min read Last Updated : Jul 22 2025 | 11:54 PM IST

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At least 10 asset management companies (AMCs) are preparing to launch long-short equity funds for high-net-worth individuals. These will operate under the Securities and Exchange Board of India’s (Sebi’s) new Specialised Investment Fund (SIF) framework, effective April 1, 2025, which mandates a minimum investment of ₹10 lakh. Sebi has introduced seven categories of long-short funds: three equity-oriented, two debt-oriented, and two hybrid.

How these funds work

Long-short funds aim to generate returns in both rising and falling markets by taking long positions when prices are expected to rise and short positions—via futures or options—when prices are expected to fall. “This

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