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Hedge Funds
Hedge funds are still in their early days in India. Hedge funds are actively managed investment pools that employ highly complex strategies to deliver above-average returns to the investors. They are alternatively risky investment choices that require a higher investment. For this reason, only high-net-worth individuals and financial entities are drawn to this type of investment option. Since Hedge Funds are gaining popularity in India, it deserves a closer look.
Investment Plans
-
Guaranteed Tax Savings
Under sec 80C & 10(10D) -
₹1 Crore
Invest ₹10k per month* -
Zero LTCG Tax
Top performing plans˜ with High Returns**
Invest ₹10K/month & Get ₹1 Crore returns*
Best SIP Funds
Payment Mode
Invest
₹ 10,000
Invest for
Instant tax receipt
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Opportunities Fund
AUM (Cr)
₹35,672
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 25.73 %
Instant tax receipt
Large Cap Equity Fund
AUM (Cr)
₹2,660
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.96 %
Instant tax receipt
Accelerator Mid-Cap Fund II
AUM (Cr)
₹5,410
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.15 %
Instant tax receipt
Diversified Equity Fund
AUM (Cr)
₹3,524
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.02 %
Instant tax receipt
Frontline Equity Fund
AUM (Cr)
₹4,206
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.13 %
Instant tax receipt
Grow Money Plus Fund
AUM (Cr)
₹434
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.74 %
Instant tax receipt
Instant tax receipt
Instant tax receipt
Large Cap Equity Fund
AUM (Cr)
₹2,660
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.96 %
Diversified Equity Fund
AUM (Cr)
₹3,524
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.02 %
Frontline Equity Fund
AUM (Cr)
₹4,206
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.13 %
Grow Money Plus Fund
AUM (Cr)
₹434
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.74 %
Growth Super Fund
AUM (Cr)
₹13,305
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.11 %
Opportunities Fund
AUM (Cr)
₹35,672
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 25.73 %
Accelerator Mid-Cap Fund II
AUM (Cr)
₹5,410
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 24.15 %
Growth Opportunities Plus Fund
AUM (Cr)
₹969
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 23.22 %
Classic Opportunities Fund
AUM (Cr)
₹13,357
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.83 %
Opportunities Fund
AUM (Cr)
₹3,245
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 22.95 %
Equity Top 250 Fund
AUM (Cr)
₹535
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 20.13 %
Whole Life Income Fund
AUM (Cr)
₹872
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 6.22 %
Whole Life Aggressive Growth Fund
AUM (Cr)
₹849
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 22.92 %
Save N Grow Money Fund
AUM (Cr)
₹63
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 11.95 %
Asset Allocation Fund II
AUM (Cr)
₹297
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 13.85 %
Multi Cap Balanced Fund
AUM (Cr)
₹2,007
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 14.34 %
Super Select Equity Fund
AUM (Cr)
₹1,239
Estimated Value
₹
After 5 years
Returns (p.a.)
+ 21.56 %
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What is a Hedge Fund?
Hedge Fund primarily protects against investment risks using pooled money from accredited investors. In other words, they hedge risks to deliver high returns while using complex strategies to invest in non-traditional asset classes.
Functionally, Hedge Funds are private investment partnerships or overseas investment corporations. They are not registered with SEBI and do not need NAV disclosure daily unlike mutual funds.
The minimum investment in Hedge Funds is very high, practically eliminating investors who are not wealthy. It also implies that the charges applied are higher than other traditional investment funds.
- Insurance Companies
- Mutual Funds
| Returns | ||||
|---|---|---|---|---|
| Fund Name | 5 Years | 7 Years | 10 Years | |
| High Growth Fund Max Life | 27.23% | 21.27% |
18.4%
View Plan
|
|
| Top 200 Fund Tata AIA | 31.36% | 21.73% |
17.46%
View Plan
|
|
| Accelerator Mid-Cap Fund II Bajaj Allianz | 24.15% | 12.92% |
14.99%
View Plan
|
|
| Opportunities Fund HDFC Standard | 25.73% | 14.99% |
15.14%
View Plan
|
|
| Equity II Fund Canara HSBC Oriental Bank | 19.44% | 10.32% |
10.53%
View Plan
|
|
| Growth Opportunities Plus Fund Bharti AXA | 23.22% | 14.94% |
14.83%
View Plan
|
|
| Multiplier Birla Sun Life | 26.67% | 14.27% |
15.83%
View Plan
|
|
| Equity Top 250 Fund Edelwiess Tokio | 20.13% | 12.14% |
11.86%
View Plan
|
|
| Opportunities Fund ICICI Prudential | 22.95% | 13.36% |
12.55%
View Plan
|
|
| Flexi Growth Fund LIC | - | - |
-
View Plan
|
|
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| Returns | ||||
|---|---|---|---|---|
| Fund Name | 3 Years | 5 Years | 10 Years | |
| Active Fund QUANT | 23.92% | 31.48% |
21.87%
|
|
| Flexi Cap Fund PARAG PARIKH | 20.69% | 26.41% |
19.28%
|
|
| Large and Mid-Cap Fund EDELWEISS | 22.34% | 24.29% |
17.94%
|
|
| Equity Opportunities Fund KOTAK | 24.64% | 25.01% |
19.45%
|
|
| Large and Midcap Fund MIRAE ASSET | 19.74% | 24.32% |
22.50%
|
|
| Flexi Cap Fund PGIM INDIA | 14.75% | 23.39% |
-
|
|
| Flexi Cap Fund DSP | 18.41% | 22.33% |
16.91%
|
|
| Emerging Equities Fund CANARA ROBECO | 20.05% | 21.80% |
15.92%
|
|
| Focused fund SUNDARAM | 18.27% | 18.22% |
16.55%
|
|
Last updated: May 2025
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Hedge Fund Categories
Hedge Funds are categorized on broadly adopted strategies and designed to cash in on their specific market windows. Hedge Fund under this category is either event-driven or fixed-income arbitrage. The other classification used for Hedge Funds is based on the fund manager’s investment style.
Regardless of the category, Hedge Funds are illiquid as the investment is locked up for pre-determined periods. Moreover, withdrawal is permitted in fixed quarterly or annual intervals.
Features and Benefits of Hedge Funds
The Indian Hedge Fund industry is nascent, having received the SEBI’s green signal only in 2012 as an Alternative Investment Fund (AIF). The fund’s salient features are:
-
Select Investors: Investment in the fund suits high net-worth individuals (HNIs), Banks, Insurance Companies, Endowments, Pension Funds, and similar entities who can afford the minimum Rs. 1 Cr investment.
-
Diversified Portfolio: The Hedge Fund portfolio comprises diverse asset classes comprising derivatives, currencies, stocks, real estate, and bonds, limited by the mandate.
-
Wide Latitude: Hedge Fund Managers enjoy extensive latitude despite being limited by its mandate. The fund manager can invest in any asset class – derivatives, stocks, currencies, land, and real estate, to name a few.
-
High Risk: The asset classes in the portfolio are prone to suffer huge losses due to the investment strategy. Moreover, the long lock-in period can turn the investment sticky, resulting in losses.
-
High Fees: You have to bear higher charges in the Hedge Funds comprising expense ratio and management fee. The globally accepted rates are defined as ‘Two and Twenty,’ which boils down to a fixed 2% fee plus 20% of the profits. However, in India, you pay a management fee of 2% or 1%, while profit sharing is between 10 and 15%.
Who are the Potential Hedge Fund Investors?
Hedge Funds, unlike mutual funds, are managed privately by experts. Since the cost of operations and the minimum investment is high, investment in the fund is restricted to the wealthy. However, only financial wealth does not suffice as the investor must be an aggressive risk seeker.
Moreover, the fund manager keeps pace with the rapid market movements. Accordingly, the investor must match the dizzying speeds at which the assets are bought and sold with the sole aim of booking profits.
Therefore, you must repose full faith in the fund manager else steer clear from investing in Hedge Fund.
How Does the Hedge Fund Work?
The returns from Hedge Funds are not as dependent on the market conditions as on the fund manager’s skill in capital asset allocation and the traded asset classes. It is the fund manager’s maneuvers that yield returns rather than the asset class.
Accordingly, strategies evolve around diversified exposure to reduce risk. Some of the common ploys used by the fund managers are:
-
Sell Short: The fund manager sells the shares when the prices are expected to drop. The future buy-back at lower prices is the key to exceeding returns over investment.
-
Use Arbitrage: Fund managers are known to take advantage of inefficient and contradictory pricing in securities.
-
Explore Upcoming Events: Sometimes, market events present themselves, opening a window of opportunity. For example, a fund manager decides to invest if acquisitions, mergers, and spin-offs appear on the horizon.
-
Discounted Securities: Your fund manager never loses an opportunity to cash distress-sale of company shares. Usually, such purchases at unbelievably low prices are sealed after meticulous analyses of the pros and cons.
Risk Perceptions in Hedge Funds
Hedge Fund investments are considered risky as a strategic move to cushion potential losses. Usually, Hedge Funds are constantly on the lookout for outsized returns. Fund managers are not shy of using any investment strategy from the available options focused on profits. They are even ready to invest in speculative instruments to explore higher returns.
Let us check out how:
-
Hedge Funds are exposed to potential losses in a concentrated investment strategy.
-
Investors must factor in a lengthy lock-in in Hedge Fund investments.
-
Minor losses can become huge when you use borrowed money or leverage for Hedge Fund investment.
Hedge Funds and Other Investments
Hedge Funds are similar to other investments like the Mutual Fund and Exchange-Traded Fund (ETF) as they are primarily money pools collected from multiple investors.
The other distinguishing elements are:
-
Hedge Funds are privately managed with the sole aim to exceed market returns.
-
Fund managers take significant risks to ensure the highest returns through Hedge fund investments.
-
Hedge Funds enjoy greater flexibility than other instruments as they are not SEBI registered and loosely monitored.
-
The charges applied in Hedge Funds are much higher than other comparable instruments.
In Conclusion
Hedge Funds offer a rare opportunity to the wealthy investors for highest returns. However, they are risky investments and not open to investors who do not pursue risk aggressively.
Despite being a young investment option, the expert fund managers are steering Hedge Fund investments by adopting complex strategies to maximize returns. You must always take professional advice before investing in a hedge fund.
FAQ's
-
Q. What are the tax implications in Hedge Fund Investments?
A. Income from Hedge Fund investment is taxable at the investment fund level and is thus, not on a level playing field with Mutual Funds. -
Q. Is the Hedge Fund reporting a must?
A. Hedge Funds are not registered with SEBI. Accordingly, you are not required to submit any report. Thus, disclosure of the NAV at day-end is also not reported. -
Q. What investment strategy is adopted by the Hedge Funds?
A. Hedge Funds can look for investment strategies in the following:- Macro
- Equity
- Relative-Value
- Activism
- Fund of funds
-
Q. What are the different types of Hedge Funds in the Indian market?
A. There are mainly three types of Hedge Funds in the Indian market. They are:- Domestic Hedge Funds
- Offshore Hedge Funds
- Fund of Funds.
-
Q. What do you mean by Fund of Funds?
A. Fund of Funds is a Mutual Fund that invests in Hedge Funds instead of its underlying securities.
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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