What are the four building blocks of a Specialised Investment Fund portfolio?

Every SIF portfolio is built from four components: (1) equity — stocks bought the traditional way, expecting prices to rise; (2) debt and money market instruments — government bonds, T-bills, TREPS, and CDs earning 6–8% per year; (3) short positions via futures — contracts betting that specific stocks or indices will fall; and (4) cash and receivables — settlement proceeds and net current assets. Different SIFs combine these four elements in very different proportions.

What is net long exposure in a Specialised Investment Fund?

Net long exposure is calculated as total long positions minus total short positions. It tells you how the fund behaves relative to the overall market direction. A 100% net long SIF moves like a fully invested equity fund. A 70% net long SIF has meaningfully reduced market exposure — it will fall less in a downturn but also participate less in a market rally.

What is gross exposure in a mutual fund and why does it matter?

Gross exposure equals all long positions plus all short positions in absolute terms. While net long tells you the directional bet, gross exposure tells you the total activity — how many positions the fund is running simultaneously. Gross exposure above 100% means the fund is layering short-side bets on top of the long book, creating two-way activity across both directions.

Why do Specialised Investment Funds hold 30–40% in money market instruments?

The money market allocation in a SIF is not idle cash — it is an active return generator. TREPS, T-bills, and CDs earn 6–8% per year. A 40% money market allocation contributes roughly 2.8–3.2% to total returns annually, providing a fixed income carry stream alongside the equity and short alpha. It also provides liquidity for redemptions and optionality to deploy when better opportunities arise.

What does SEBI require from Specialised Investment Funds?

SEBI requires SIFs to maintain a minimum investment of ₹10 lakh per investor, keep net long exposure positive at all times (the fund cannot be overall net short), keep short exposure within limits set in each fund's scheme document, and disclose the full portfolio monthly — identical to regular mutual funds.

Inside a Specialised Investment Fund: How It Is Built and What It Looks Like

Part 3 of 6 in the Specialised Investment Funds series: Part 1 · Part 2 · Part 4 · Part 5 · Part 6

In the previous article, we established that regular mutual funds can only go long — they buy stocks and wait for prices to rise. Specialised Investment Funds (SIFs) break that limitation. But what does a SIF actually look like inside? How is it structured?

Let us open the hood using real portfolios.

The Four Building Blocks of a SIF

Every SIF portfolio, regardless of the fund house, is built from some combination of four things:

1. Equity (long) Stocks bought the traditional way. The fund owns shares of HDFC Bank, Reliance, Infosys, betting these will rise in value. This is identical to what any equity mutual fund does.

2. Debt and Money Market Instruments Fixed-income instruments like government bonds, Non-Convertible Debentures (NCDs), Treasury Bills, and overnight lending instruments called TREPS. These earn steady returns, typically 6–8% per year, and provide the fund with liquidity.

3. Short Positions (via futures) Using futures contracts to bet that specific stocks or indices will fall in price. When those stocks fall, these positions generate profit. This is the defining feature of a SIF that no regular mutual fund has.

4. Cash and Receivables Residual cash, settlement receivables, and Net Current Assets (NCA): the plumbing of the portfolio.

Reading a Real SIF Portfolio: Five Funds Side by Side

Here are five SIFs that disclosed their March 2026 portfolios, with their actual allocations:

Fund	Equity	Bonds	Money Market	Gross Short
Arudha Equity Long-Short	60%	—	40%	0%
DynaSIF Equity Long-Short	66%	—	37%	9%
qSIF Hybrid Long-Short	39%	18%	44%	24%
Arudha Hybrid Long-Short	31%	38%	31%	31%
qSIF Equity Long-Short	68%	—	32%	8%

Already you can see something interesting. These five funds all carry the "Long-Short" label, but their actual portfolios look completely different. Some are barely short at all. Some are aggressively short. And one — Arudha Equity Long-Short — has zero short positions despite its name.

Let us understand why.

The Net Long Number: The Single Most Important Figure

For any SIF, the number that cuts through all the complexity is the Net Long exposure.

Net Long  =  All long positions  -  All short positions

If a fund has ₹100 invested, with ₹75 in stocks and ₹25 in short futures:

Net Long = ₹75 - ₹25 = ₹50 (or 50% of NAV)

This tells you: the fund behaves like a 50% long-only investor in terms of market direction. If markets rise 10%, this fund gains roughly 5%. If markets fall 10%, it loses roughly 5% — everything else being equal.

Here is how our five funds compare:

Fund	Net Long	What it means
Arudha Equity Long-Short	100%	Fully long: no shorts deployed
DynaSIF Equity Long-Short	100%	Fully long net, despite running 9% in shorts
qSIF Equity Long-Short	96%	Near-fully long
qSIF Hybrid Long-Short	77%	Meaningfully reduced market exposure
Arudha Hybrid Long-Short	69%	Significantly reduced — largest short book

DynaSIF is an interesting case. It runs both long futures AND short futures, and they happen to net out to exactly 100%. This does not mean the shorts are useless — they are picking specific stocks to bet against, while the long futures add to specific sectors. But at the total portfolio level, the net is equivalent to a fully invested long-only fund.

Gross Exposure: The Other Number You Need

Net long tells you the directional bet. Gross exposure tells you the total activity — how much is "at work" in both directions simultaneously.

Gross Exposure  =  All longs  +  |All shorts|

Using the same example: ₹75 long + ₹25 short = ₹100 gross. Or if a fund has ₹75 long + ₹50 short: Net = ₹25, Gross = ₹125.

Gross exposure above 100% means the fund is running more total positions than its NAV, using the short side to layer additional bets on top of the long book.

Fund	Gross Exposure	Interpretation
Arudha Equity Long-Short	100%	No extra activity beyond basic long portfolio
DynaSIF Equity Long-Short	118%	18% extra in simultaneous longs and shorts
qSIF Hybrid Long-Short	125%	25% extra, significant two-way activity
Arudha Hybrid Long-Short	131%	31% extra — most active two-way book

The Money Market: Not Idle Cash

You might look at qSIF Hybrid holding 44% in money market instruments and assume that is simply cash sitting idle. It is not.

The money market holdings in every SIF are a deliberate investment:

TREPS (overnight lending between institutions): earns 6–7% per year
Treasury Bills (91-day, 182-day, 364-day): earns 6.5–7% per year
Certificates of Deposit (CDs) issued by banks: earns 7–8% per year
NCDs (longer-term corporate bonds): earns 7.5–9% per year

These are not parking spaces. They are active return generators. The fund is simultaneously earning equity-like returns from its stock picks and bond-like returns from its fixed income book, while also running a short book.

Additionally, these instruments serve as margin collateral for the short futures positions, but the actual margin requirement is a small fraction of what the fund holds. Typically less than 2% of NAV needs to be locked as margin, even when running significant short exposure. The rest earns income.

What SEBI Requires

SEBI's SIF framework sets minimum standards:

Minimum investment: ₹10 lakh per investor, not for retail investors, but for sophisticated, high-net-worth investors
Net long exposure: Must remain positive (the fund cannot be overall net short)
Short exposure: Capped; funds cannot run unlimited short positions
Disclosure: Full portfolio disclosed monthly, just like regular mutual funds

The ₹10 lakh minimum is significant. SEBI is explicitly saying: this product is for people who can understand and absorb the risks of derivatives. It is not for someone investing their first ₹1,000 in a SIP.

Why Do Different SIFs Look So Different?

Because each fund house is using the SIF framework for a different purpose:

Arudha Equity Long-Short: In ramp-up phase, short book not yet deployed. Right now, essentially an equity fund.
DynaSIF: Running a genuine long-short equity strategy — 56 stock picks on the long side, 6 directional shorts on specific stocks.
qSIF: Using the framework to combine equity with aggressive money market deployment and selective hedging.
Arudha Hybrid: Using the SIF structure to hold high-yield bonds while running a hedged equity book. A very different animal.

In the next article, we will dig into the most important concept that separates the strategies from each other: the difference between a hedged short and a naked short, and why it matters enormously.

Next: Part 4 — Hedged Shorts vs Naked Shorts: The Difference That Changes Everything →

Data: March 2026 AMFI portfolio disclosures. Full research methodology →

Investments in mutual funds are subject to market risks. Past performance is not an indicator of future returns. This analysis is for informational purposes only and does not constitute investment advice.

Explore the Live Fund Data

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