Mapping India’s Long-Short Fund Landscape: What Sets Craving Alpha Apart
As India’s equity market matures, investors are waking up to the need for structured downside protection, how many of these strategies actually deliver what they promise?
India’s capital markets are evolving rapidly — and with that comes the growing demand for smarter, risk-adjusted investing. Long-short funds are positioned at the center of this evolution, offering investors exposure to upside potential while cushioning against drawdowns.
Yet despite their promise, the long-short fund space in India remains both underexplored and misunderstood. Most strategies still cluster around traditional arbitrage, momentum-chasing, or cosmetic hedging.
At Craving Alpha Wealth Fund, we’ve taken a different path — rooted in deep value, powered by disciplined deployment, and protected through intelligent index-based hedging.
Let’s explore the current fund landscape — and where we fit in.
🔎 India’s Long-Short Fund Ecosystem: 4 Common Models
1. 🏦 Arbitrage & Market-Neutral Strategies
These funds rely on capturing the price differential between the cash and futures segments of the same stock. They typically run net market exposure close to zero.
Objective: Generate low-volatility, tax-efficient returns
Return Profile: ~7– 12% CAGR, often used by risk-averse investors
Risk: Minimal; more of a short-term money parking strategy
Limitation: These funds don’t generate alpha. They’re useful as debt replacements, not equity strategies.
2. ⚖️ Aggressive Long-Short (High Skew) Funds
This category includes funds that swing between extreme net long and net short positions based on the fund manager’s macro view or sentiment. They often rely on top-down forecasting.
Objective: Maximize returns through directional conviction
Approach: May go 100% net long in bullish phases or flip to 30% net short in bearish environments
Example Tactics: Momentum filters, macro overlays, volatility triggers
Limitation: This model relies heavily on timing. A mistimed turn can result in large underperformance or unintended beta.
3. 🧮 Covered Call / Option Overlay Funds
These funds overlay option writing (usually covered calls) on top of their long positions. This limits upside beyond a certain price point while generating additional yield.
Objective: Generate periodic cash flows in sideways markets
Return Profile: Stable in range-bound phases, underwhelming in bull cycles
Used In: Hybrid AIFs, Conservative PMSes
⚠️ Misconception: Many market participants brand this as a “synthetic short” — it is not. Selling a call caps gains but does not hedge systemic downside in a bear market.
🧠 Where Craving Alpha Stands Apart
At Craving Alpha, we’ve taken a clean, principle-driven approach. We’re not here to “game volatility” — we’re here to compound responsibly while protecting capital.
Here’s how our strategy differs:
🏛️ 1. Value Investing Core, Not Momentum or Macro Betting
Our long book consists of deeply moated businesses available at a high margin of safety. These are franchises with pricing power, scale advantages, and structural tailwinds — yet often overlooked due to temporary concerns or poor narratives.
We don’t chase euphoria. We wait for value to converge with price.
🛡️ 2. Index-Only Hedging — Not Stock-Level Shorts
Instead of shorting individual names (which can backfire due to corporate actions, short squeezes, or takeovers), we hedge selectively using broad-market indices like Nifty or sectoral indices with historically poor upside capture but strong downside correlation.
This ensures:
We stay invested during bull phases
Our downside is cushioned during macro shocks
No idiosyncratic short risks
💰 3. Covered Calls for Yield, Not Defence
Yes, we occasionally use covered calls — but only on positions where we seek additional yield, and never as a replacement for true hedging.
When used: On high-confidence positions with slow-moving narratives
Purpose: Generate incremental cash flow in range-bound conditions
Not used for: Building synthetic shorts or directional protection
We believe in clarity over complexity — and our hedges are never disguised under derivative overlays.
🧭 4. Disciplined Deployment Over Emotional Allocation
We deploy capital gradually — typically 5% per week — allowing us to:
Avoid FOMO-driven overexposure
Scale in when fear creates value
Stay consistent during noisy macro cycles
Our partial hedge + full conviction framework has helped us scale up meaningfully in past market dips — without compromising on return hygiene.
🔐 A Hedge Fund Built for India’s Golden Decade
India’s macro remains robust — but so does its volatility. Whether it’s election cycles, global taper tantrums, or sector-specific bubbles, the future will reward resilience over bravado.
At Craving Alpha, we don’t attempt to predict the next crash or top — we prepare for both. Our strategy is built to thrive across regimes, with an asymmetric return profile that maximizes upside while consciously mitigating tail risks.
🧠 Final Thoughts
Most long-short strategies in India either lean too safe (arbitrage), too aggressive (directional punts), or too cosmetic (covered calls pretending to be hedges).
We believe in a middle path that’s grounded, scalable, and sustainable — combining value investing with thoughtful index-based hedging.
If you’re looking to participate in India’s growth without betting the house on every market mood swing, Craving Alpha Wealth Fund offers a long-short strategy worth watching — and backing.