SIFs Offer Better Risk-Adjusted Returns, Say Rishi Kohli and Jyotivardhan Jaipuria

SIFs and PMS Serve Different Investor Priorities

The choice is less about chasing the highest return and more about matching a strategy’s risk, volatility and time horizon to an investor’s needs.

SIF strategies put risk management in the foreground

The central argument for SIFs is not simply that they can generate returns, but that they can pair return-seeking with explicit risk management. Rishi Kohli, chief investment officer at JioBlackRock Mutual Fund, said that combining returns with risk receives too little attention in India. Many SIFs are designed to sit between equity and fixed income, using strategies intended to balance growth potential with greater control over downside exposure.

Kohli said SIF assets had crossed ₹40,000 crore in less than a year, with about 75 per cent directed to hybrid long-short strategies. These funds may use short positions and derivatives, but those tools do not guarantee protection or better performance. Their value depends on how they are used, while transaction costs and slippage may weigh on results as assets grow.

Hybrid long-short funds could target returns of around 9–11 per cent, Kohli said, with an emphasis on limiting risk. That is a target, not an assured outcome: results will depend on market conditions and the strategy’s execution. Investors should understand whether derivatives are being used mainly to hedge or to enhance returns before assessing the risk profile.

PMS demands patience with concentrated portfolios

PMS is positioned for investors prepared to accept more volatility in pursuit of potentially higher returns than mutual funds can deliver. Valentis Advisors founder and chief executive Jyotivardhan Jaipuria said clients should assess the strategy over a three- to five-year horizon, rather than judge it by a few months of performance. His advice was that first-time equity investors begin with mutual funds and build experience before considering PMS.

The potential for higher returns comes with meaningful risks. PMS portfolios may hold concentrated positions, often including smaller companies, making performance more sensitive to individual holdings and market swings. Jaipuria said his firm’s strategy held fewer than 20 stocks, with detailed research on each. A weak year could test investors who enter without understanding that concentration or the time horizon involved.

Concentration can also create a different portfolio from a collection of mutual funds, whose holdings may overlap. Jaipuria argued that smaller portfolios can be more nimble in pursuing opportunities. That flexibility, however, does not remove the possibility of losses; it makes the manager’s research and investors’ ability to stay invested especially important.

Transparency and tax treatment are distinct considerations

PMS investors hold securities in their own demat accounts and can track the stocks bought and sold, including purchase prices. Jaipuria also cited more direct access to the portfolio manager as a potential distinction. Investors should weigh these features against the demands of following a concentrated portfolio, rather than treating visibility as evidence of lower investment risk.

Taxation can also differ in timing. In PMS, capital gains may become taxable as individual securities are sold, whereas mutual fund investors generally incur capital gains tax when they redeem units. Jaipuria said investors should compare post-tax returns, not just when tax is paid. Eligible capital losses may be set off against gains subject to applicable rules, but the outcome depends on each investor’s circumstances and investment structure.

Market conditions do not remove the need to match risk

Kohli said valuations had become more reasonable after a correction, but opportunities remained uneven across stocks and sectors. Patchy earnings growth and geopolitical risks, he said, supported the case for strategies seeking moderate returns without taking on the full volatility of equities. Jaipuria was more optimistic about the next two years, pointing to improving earnings growth, reasonable valuations and the possibility of a recovery in foreign investor flows. These are views, not guarantees of future market performance.

The distinction between the products is therefore practical: SIFs may appeal to investors prioritising a managed balance between return generation and risk, while PMS is for those seeking a more concentrated route to potential outperformance and able to withstand sharper fluctuations. Neither label alone establishes that a strategy is suitable; the investor’s existing portfolio and capacity to remain invested matter.

Key Highlights

• SIF assets crossed ₹40,000 crore in less than a year, with around 75 per cent in hybrid long-short strategies, Kohli said.
• Hybrid long-short funds may target returns of 9–11 per cent, but outcomes are not assured and depend on market conditions.
• PMS portfolios can be more concentrated and volatile, making a multi-year investment horizon important.
• PMS investors can track individual securities in their demat accounts; tax may arise as securities are sold.
• The appropriate choice depends on risk appetite, investment experience, portfolio composition and return objectives.

Investor Note: Compare SIFs and PMS on their strategy, risks, costs and likely post-tax outcomes—not on return targets alone. Investors unfamiliar with equity volatility may want to build experience before taking on concentrated PMS exposure.