Altiva Hybrid Long Short Fund: A Diversified Strategy for All Markets

Altiva is introducing a new investment option: the Altiva Hybrid Long-Short Fund. This fund is designed to generate income using a combination of strategies, primarily arbitrage and fixed income, with additional exposure to special situations and derivatives.

The New Fund Offer (NFO) for this fund will be available from October 1st, 2025, to October 15th, 2025.

How the Fund Invests

The Altiva Hybrid Long-Short Fund divides its investments into two main parts:

Core Investments (60-100% of the fund):

• Arbitrage & Covered Call (20-40%): This part aims to earn returns from small price differences in markets.
• Fixed Income (40-60%): This involves investing in debt instruments to provide steady income and potential value growth.

Additional Investments (0-30% of the fund):

• Special Situations (0-10%): This includes participating in events like new company listings (IPOs), company buybacks, mergers, and other specific market opportunities.
• Derivative Strategies (10-20%): This uses tools like Long-Short equities, Straddles, Strangles, and Put-call parity to manage risk and seek returns.

How Risk is Managed

The fund has specific rules to manage risk, especially for its derivative and special situations investments.

For Derivative Strategies:

• Limits on Single Stocks: The fund limits how much it can invest in any one company's stock (e.g., Large Cap Stocks less than 3%, Mid Cap Stocks less than 2%, total stocks more than 20).
• Limits on Sectors: There are also limits on how much can be invested in any single industry sector (e.g., less than 10% for non-Nifty50 stocks, plus or minus 7.5% of Nifty50 exposure).
• During Market Changes: The fund uses techniques like Delta hedging and arbitrage to reduce risk during volatile times. A "stop loss" of 5% is set for the overall strategy.
  • Specific Derivative Strategies Used: Covered Call, Short Straddle, and Short Strangle.

For Special Situations:

• IPO Rules: The fund only participates in large, main board IPOs (not small and medium enterprises) with a minimum size of Rs 1,000 Cr.
• Open Offer/Buyback Rules: If a company's offer to buy back shares is not fully accepted, the fund limits its investment in that single stock (up to 10% for F&O stocks, up to 5% for non-F&O stocks).
• Pair Trade: To reduce risk from price differences, the fund aims for investments that are neutral to specific sectors or themes, uses a diverse portfolio, and applies the same investment limits as derivatives.

Fund Performance in Different Market Conditions

The fund uses a strategy designed to perform in various market environments.

• Flat Market (little change): Strategies like Covered Call + Arbitrage, Debt, Derivative (Straddle, Strangle), and Special Situations (Merger spreads) are used.
• Bull Market (rising prices): Long Equity, Special Situations (IPOs, Open Offer), Derivatives (Straddle, Strangle), and Covered Call strategies are used.
• Bear Market (falling prices): Short Equity, Debt, Arbitrage, Buybacks, and Open Offer strategies are used.

When the fund might perform less well:

• Very sharp drops in the market (Sharp Bear Markets)
• Extremely unpredictable markets (Extremely High Volatile Markets)
• Very low interest rates or a sudden large increase in interest rates

When the fund might perform better:

• Rising markets (Bull Market)
• Stable markets (Flat Market)

Why This Fund Might Be Considered

Here are some points about the Altiva Hybrid Long-Short Fund:

• Aims for Steady Income with Less Fluctuation: The fund's core focus on arbitrage and fixed income is intended to provide consistent returns with lower ups and downs. Additional exposure to special situations and derivatives offers potential for growth.
• Strategy for All Market Types: The fund uses a mix of strategies to achieve more consistent results regardless of overall market trends.
• Tax Considerations: Long-term capital gains are taxed at 12.5% over a 2-year period, which may make after-tax returns competitive compared to similar funds.
• Risk Management: The fund uses active management and specific rules to control risk, aiming to reduce large losses and provide more stable outcomes.
• Experienced Team: The fund is managed by a team with experience in various investment strategies, including derivatives and special situations.

Final Words

The Altiva Hybrid Long-Short Fund is an investment option that combines different strategies to generate income and manage risk. It uses a mix of core and additional investments, along with specific risk controls, to operate in various market conditions.

Disclaimer: The content is meant for education and general information purposes only.  Past performance is not indicative of future returns. Mutual Funds are non-exchange traded products, and INDstocks is merely acting as a mutual fund distributor. All disputes with respect to distribution activity, would not have access to the exchange investor redressal forum or arbitration mechanism. Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing. INDstocks Private Limited (formerly known as INDmoney Private Limited) 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), AMFI Registration No: ARN-254564, SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500, Research Analyst Registration No. INH000018948 BSE RA Enlistment No. 6428.