Kotak Mahindra Launches Infinity Equity Long-Short Fund to Chase Capital Appreciation with 25% Unhedged Short Exposure

Kotak Mahindra Launches Infinity Equity Long-Short Fund to Chase Capital Appreciation with 25% Unhedged Short Exposure​

Mumbai: Kotak Mahindra Mutual Fund has announced the launch of its new Specialized Investment Fund, the INFINITY Equity Long-Short Fund. This SIF is positioned as a high-conviction equity vehicle designed for investors seeking aggressive long-term capital appreciation in dynamic market environments. The fund aims to capitalize on potential upward movements while simultaneously mitigating risks through disciplined short selling strategies.

The fund will be available with units offered at ₹10/- each during the New Fund Offer (NFO). It is part of a growing push by Asset Management Companies (AMCs) to incorporate complex derivative strategies into mainstream mutual fund offerings. The investment strategy has been vetted according to the Securities and Exchange Board of India (SEBI) (Mutual Funds) Regulations, 2026.

Strategic Framework: How Infinity SIF Operates​

The INFINITY Equity Long-Short Fund employs a dual mandate, combining fundamental stock picking with tactical short positions. The core investment allocation maintains a strong focus on equity and equity-related instruments, with an indicative minimum of 80% and a maximum ceiling of 100%. This structure aims to provide resilient performance across varying market cycles.

A significant element of the fund's strategy involves limited but potent short exposure through derivatives. The mandate permits up to 25% of net assets to be allocated to unhedged derivative positions for shorting purposes. This tactical capability allows the portfolio to benefit from price declines in overvalued sectors or equities, adding resilience during bearish market phases.

The fund's investment objective is defined as generating long-term capital appreciation. To measure and track this goal, the SIF will benchmark its performance against the NIFTY 500 Total Return Index (TRI). The NIFTY 500 TRI was selected due to its broad market representation across large, mid, and small-cap stocks, providing a stable baseline for active management.

Investment Approach and Asset Allocation Breakdown​

The investment approach is highly disciplined, relying on both proprietary research and sophisticated hedging tools. For stock selection, the portfolio construction utilizes a bottom-up Business, Management, and Valuation (BMV) model. This methodology concentrates on companies exhibiting GARP (Growth at Reasonable Prices).

The fund’s asset allocation strategy includes three key components:

• Equity & Equity Related Instruments: The primary focus, allocated between 80% and 100%.
• Debt & Money Market Instruments: Allocations are capped between 0% and 20%, providing a liquidity reserve.
• InvITs (Real Estate/Infrastructure): These investments are restricted to a maximum of 20% of total assets, allowing the fund to tap into infrastructure sector income streams.

In addition to its primary strategy, the SIF is also equipped with hedging flexibility. The fund can hedge up to 100% of remaining long equity and debt positions using derivatives, enabling a fully hedged stance when required by market volatility. This demonstrates a highly flexible and adaptive risk management design.

Expertise Driving the Investment Strategy​

The success of this specialized strategy rests on the capabilities of its investment team members. Mr. Kalpesh Jain, with 18 years of experience at Tata Asset Management, is appointed as the Fund Manager for Equity and Overseas investments. Meanwhile, Mr. Abhishek Bisen, who has been with Kotak AMC since 2006, heads the debt and money market portfolio.

The fund’s structure ensures rigorous risk monitoring across all segments. For instance, investments in securitized debt are evaluated using a comprehensive credit assessment process covering originator track record, asset pool characteristics, and credit enhancement quality. This multi-layered approach helps mitigate the risks inherent in complex financial instruments.

Regulatory Compliance and Operational Details​

The INFINITY SIF operates under stringent SEBI regulations, with numerous prudential limits governing its activities. Key operational specifics include:

• Liquidity: The strategy offers units for subscription and redemption at NAV-based prices daily (on business days).
• Transaction Costs & Levy: A stamp duty of 0.005% is levied on all applicable SIF transactions, resulting in a reduction of allotted units during purchases. Importantly, no transaction charges are deducted from the investment amount for investors subscribing through distributors (Regular Plan).
• Exit Load: The structure includes a load of 0.5% for redemption or switch-out if done within 30 days of allotment. For redemptions after this period, there is nil exit load.

The fund management team has provided clear commitments regarding transparency. Monthly portfolio disclosures, including the composition and ISINs of all investments (along with derivatives), will be provided on both the Infinity SIF website and AMFI’s platform within 10 days of the close of every alternate month.

Risk Mitigation Strategies: A Deep Dive​

Given the complexity and leverage inherent in a long-short equity strategy, the fund includes several advanced risk mitigation measures. For example, investments involving securitized debt are governed by detailed assessment criteria covering loan-to-value ratios and average seasoning periods.

Risks associated with derivatives—which include basis risk and potential limitations on upside when used for hedging—are carefully monitored. The overall gross exposure across equity, debt, derivative positions, repo transactions, and InvITs is strictly limited to 100% of the net assets. This ensures that high-leverage activities remain within acceptable bounds defined by regulatory guidelines.

The launch of INFINITY Equity Long-Short Fund underscores the AMC's commitment to providing advanced investment tools tailored for sophisticated investors seeking controlled risk exposure while aiming for superior, long-term returns in an increasingly volatile market landscape.