Midcaps to Hybrids: Inside ICICI Prudential's new iSIF Long-Short funds

Both Investment strategies adopt long-short approaches designed to navigate volatile and uneven market conditions.

As Indian equity markets grapple with sharp rotations, volatile mid- and small-cap cycles, and uneven leadership, fund houses are increasingly looking beyond traditional long-only strategies.  ICICI Prudential Mutual Fund on Monday launched two new investment offerings under SEBI’s recently introduced Specialised Investment Funds (SIF) framework — a category designed to sit between mutual funds and portfolio management services (PMS).

 

The asset manager has rolled out the iSIF Equity Ex-Top 100 Long-Short Fund and the iSIF Hybrid Long-Short Fund, with the New Fund Offer (NFO) for both opening on January 16, 2026, and closing on January 30, 2026. 

 

These strategies are aimed squarely at high-net-worth investors seeking more flexible, market-adaptive portfolios in an environment where traditional diversification is proving insufficient.

 

 

Why SIFs Matter: Bridging a Long-Standing Gap

 

SEBI introduced the Specialised Investment Funds framework to address a structural gap in India’s investment landscape. Traditional mutual funds offer broad access and strong regulatory oversight but are restricted in portfolio construction, particularly when it comes to advanced derivative strategies. PMS and AIFs, on the other hand, offer flexibility but come with significantly higher entry thresholds — typically ₹50 lakh and above.

 

SIFs create a middle path.

 

With a minimum investment threshold of ₹10 lakh per PAN, SIFs combine mutual fund-like transparency with the ability to deploy long-short strategies, selective unhedged derivatives, and dynamic asset allocation, all within a regulated structure. For investors who have outgrown conventional equity funds but are not yet comfortable with PMS-style concentration and fees, this segment opens a new door.

 

The Market Problem These Funds Are Trying to Solve

 

Over the past decade, India’s mid- and small-cap stocks — collectively referred to as Ex-Top 100 stocks — have delivered sharp outperformance during bull phases, only to give back much of those gains during downturns. Data shared in the presentation shows that while small- and mid-caps often outperform large caps in upcycles, they also suffer disproportionately during market stress.

 

At the same time, institutional and retail participation in this segment has structurally increased, improving liquidity but also amplifying volatility. Investor behaviour — driven by cycles of greed and fear — tends to worsen outcomes when markets swing sharply.

 

Long-short strategies attempt to address this problem by separating stock selection from market direction, aiming to generate returns not just from rising prices but also from relative mispricing.

 

iSIF Equity Ex-Top 100 Long-Short Fund: Targeting Alpha Beyond Large Caps

 

The iSIF Equity Ex-Top 100 Long-Short Fund is an open-ended equity strategy focused on companies outside India’s top 100 by market capitalisation — essentially the mid- and small-cap universe.

 

Ex- Top 100 stock means all companies other than large cap companies as identified and disclosed by AMFI. The investment strategy seeks to capture growth opportunities in the mid- and small-cap universe while managing their inherently higher volatility through long-short positioning and derivative strategies.

 

The fund takes long positions in fundamentally strong companies with earnings visibility, improving balance sheets, and valuation comfort, while selectively shorting overvalued stocks through derivatives. Short exposure through unhedged derivative positions is capped at 25%, in line with SEBI norms.

 

The strategy follows a bottom-up stock selection approach, backed by ICICI Prudential’s in-house research coverage of over 550 companies across 27 sectors. By combining long exposure with tactical shorts, the fund aims to capture growth opportunities while cushioning downside risk, rather than relying solely on market momentum.

 

The benchmark for this strategy is the Nifty 500 TRI, reflecting its broad-market opportunity set.

 

From a taxation perspective, the strategy is expected to enjoy equity taxation benefits, including long-term capital gains eligibility after a 12-month holding period, subject to portfolio positioning and prevailing tax laws.

 

iSIF Hybrid Long-Short Fund: Smoother Outcomes Across Cycles

 

For investors seeking lower volatility and more balanced outcomes, ICICI Prudential has also introduced the iSIF Hybrid Long-Short Fund, an interval strategy that combines equity long-short positions with debt and derivative strategies.

 

Unlike pure equity approaches, this fund dynamically adjusts its net equity exposure based on valuations, market trends, and internal models. It also participates in capital market opportunities such as IPOs, QIPs, block deals, and buybacks, alongside carry-based debt strategies involving corporate bonds, CPs, and CDs.

 

The use of derivatives — including covered calls, options strategies, and portfolio hedges — is intended to generate income and manage risk in range-bound or falling markets. The benchmark for this offering is the CRISIL Hybrid 50+50 Moderate Index, underscoring its balanced mandate.

 

Various Alpha Generation Strategies

 

Stock and Sector Selection: Active stock and sector allocation based on market outlook, relative valuations, and fundamental conviction.

 

Derivative Strategies: Use of derivative strategies such as covered calls, options, and other permitted structures with a view to enhance returns and manage risk.

 

Carry-Based Debt Strategies: Investments in carry-oriented debt instruments including corporate bonds, commercial papers (CPs), and certificates of deposit (CDs).

 

Capital Market Opportunities: Participation in IPOs, QIPs, block deals, buybacks, and other instruments as permitted by SEBI regulations.

 

This strategy is designed for investors who want equity participation without full equity volatility, particularly in uncertain or sideways market phases.

 

Who Should Consider These Strategies?

 

These SIF offerings are not designed for first-time investors or those seeking simple market exposure. Instead, they are targeted at:

 

High-net-worth investors with a ₹10 lakh+ allocation per strategy

 

Investors looking to diversify beyond long-only equity funds

 

Those comfortable with derivatives and tactical asset allocation

 

Portfolios seeking risk-adjusted returns rather than pure beta

 

Both strategies allow lump-sum and SIP investments (subject to minimum thresholds), and offer daily liquidity, though exit loads apply if redeemed within the first 12 months.

 

 “Through the iSIF segment, we are offering investors investment strategies that are differentiated and those that can adapt to the evolving market condition by using approach which is permissible within the long-short investment strategies. The aim here is to deliver better risk-adjusted outcomes across market cycles," said Sankaran Naren, ED & CIO, ICICI Prudential AMC.