WSIF Equity Long-Short Fund: Strategizing positions for volatile markets

WSIF Offered by The Wealth Company Mutual Fund has launched an investment strategy under its specialized investment fund (SIF) in April 2026: the WSIF Equity Long-Short Fund. In this article, we will review the WSIF Equity Long Short Fund.

Why invest in Long Short Funds?

• Potential to participate in All Markets: They may potentially generate positive returns in both rising and falling markets by taking long positions in undervalued stocks and short positions in overvalued ones.


• Aim for Reduced Beta and volatility: Combining long and short positions may balance risks and returns, reducing portfolio volatility


• Flexibility and Tactical Allocation: Fund managers may have the flexibility to adjust exposures to long-short positions (e.g. increase long / decreasing short and vice versa), sectors, and valuations to respond to changing market conditions.


• Risk-Adjusted Returns: The ability to hedge risks and capture value creation from both sides may potentially improve the fund's Sharpe ratio and risk-adjusted performance


• Diversification Benefits: Short positions in SIF portfolios may provide additional diversification to the portfolio.


• Capital Efficiency (This is valid for leveraged Long short funds, not for unlevered LS funds): By using short positions, managers may effectively leverage capital, allowing for more concentrated bets without increasing net exposure excessively.


• Ability to Express Negative Views: Managers may express negative views on sectors, industries, or stocks directly through shorting, not just by avoiding them.

What are SIFs?

SEBI has allowed mutual funds to launch investment strategies under Specialized Investment Fund, which may bridge the gap between alternative investments like mutual funds and PMS / AIFs. SIFs may offer sophisticated investment strategies while providing operational ease, transparency, a low investment ticket (Rs 10 lakh minimum investment), and tax efficiency. SIFs will have the flexibility to use derivatives for different investment strategies. At this stage, SEBI has permitted the following strategies for SIFs.

How is an SIF different from a Mutual Fund, a PMS or an AIF?

Disclaimer - The limits will be as per respective regulations. • STCG for SIF and Mutual Fund: Equity (up to 12 months) - 20 percent; Debt - slab rate; Others (up to 24 months) - slab rate. Please consult a tax adviser for better understanding. *CAT III AIF assuming it will be a business income product

Introducing the WSIF Long Short Fund

The WSIF Long Short Fund employs an equity investment strategy, investing in listed equity and equity-related instruments, including limited short exposure in equity through derivative instruments.

Key features of the fund:

• Minimum investment of Rs 10 lakhs


• The fund aims to generate long-term capital appreciation by investing in a diversified portfolio of equity and equity-related instruments across market caps, while utilizing limited short exposure through derivatives


• Can short index/securities up to 25% of net assets /AUM.


• Daily subscription facility with daily redemption


• Fund managers: Mr. Chinmay Sathe


• Benchmark: NIFTY 500 Total Return Index (TRI)

Portfolio Construction and Risk Management Framework

The WSIF Long Short follows the QUBOID framework for portfolio construction. (See illustration.)

To understand the QUBOID framework better:

Q: Quantitative Validation: The fund managers aim to create a high-quality investable universe using financial models to check if the business is strong on hard numbers. The parameters for checking these are consistent performance, stable margins & earnings, no unnecessary dilution, Real cash flow, not just profit, clean accounting and low debt coupled with good liquidity.

U: Underlying Growth Vectors/Megatrends: The fund aims to identify megatrends and create multi-decade winners. The fund managers look for long-term trends that become part of daily life like mobile phones, Private banking shift, branded paints and adhesives, Jewellery formalization, airline penetration, and urbanization. See the graphic below to get an understanding of current and future megatrends.

B: Behavioural and Probabilistic Investing: Probabilistic Investing is a disciplined approach that explicitly incorporates uncertainty and range of possibilities into investment decisions. The QUBOID framework views outcomes as a range of scenarios, not a single forecast. The asset allocation is based on probability-weighted expected returns and risks, with constantly updated. probabilities as new data and events unfold

O: Orthogonal Factors: The fund managers look for unique triggers that are not priced in:

I: Investment Hypothesis:

• Aim for the optimum holding period to maximize returns and minimize opportunity loss.


• Aim for Optimum Diversification across Style factors and Size to minimize risk


• Quantify the returns and risks involved
  
  

  

D: Drawdown and Risk Management: The fund managers aim to protect capital first and avoid big losses by calculating worst-case drawdown, aiming to maintain margin of safety at entry, checking upside vs downside, pre-set sell rules, sizing limit so one stock can't impact the portfolio.

Typical Portfolio Stocks

The above list is for illustrative purposes only. Portfolio will be managed as per the stated investment objective, investment strategy, asset allocation in the Investment strategy Information document (ISID) and is subject to the changes within the provisions of the ISID of the Investment strategy

Bubble Detection Parameters

The above list is for illustrative purposes only. Portfolio will be managed as per the stated investment objective, investment strategy, asset allocation in the Investment strategy Information document (ISID) and is subject to the changes within the provisions of the ISID of the Investment strategy.

Current Asset Allocation

*Maximum short exposure through unhedged derivative positions in equity and equity related instruments : 25% In accordance with the clause 3.2 and 6.1.5 of the SEBI Circular Regulatory framework for Specialized Investment Funds ('SIF') dated February 27, 2025 clause 12.24.1 of the SEBI Master Circular for Mutual Funds ('Master Circular') dated June 27, 2024, the cumulative gross exposure through equity, debt, derivative positions (including commodity and fixed income derivatives), repo transactions and credit default swaps in corporate debt securities, Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), other permitted securities/assets and such other securities/assets as may be permitted by SEBI from time to time should not exceed 100% of the net assets of the investment strategy. REIT is included in equity and equity related instrument.

Contact your financial advisor or mutual fund distributor to understand if the WSIF Equity Long Short Fund is suitable for your investment needs.

Disclaimer:

The information on the blog is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. Users of this document should seek advice regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to on this document and should understand that statements regarding future prospects may not be realized. The recipient of this material is solely responsible for any action taken based on this material. Opinions, projections and estimates are subject to change without notice. Past performance may or may not sustain in future.

Wealth Company Asset Management Holdings Private Limited or The Wealth Company Mutual Fund (acting through Pantomath Trustee Private Limited) accepts no liability and will not be liable for any loss or damage arising directly or indirectly from your use of this information howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document.

"Investments in Specialized Investment Fund involves relatively higher risk including potential loss of capital, liquidity risk and market volatility. Please read all investment strategy related documents carefully before making the investment decision."