Bhavesh Jain on why Edelweiss chose a hybrid-first approach to SIFs

Bhavesh Jain of Edelweiss

Speaking at the Moneycontrol Dezerv Wealth Summit, Bhavesh Jain of Edelweiss says the firm’s approach to Structured Investment Funds (SIFs) is rooted in a long-held belief that fund houses do not need to select products for investors, but instead focus on building a credible track record. At Edelweiss, he explains, hybrid investing has always been treated as a distinct discipline, separate from pure equity or fixed income.

“Normally, every AMC has one equity CIO and one fixed income CIO,” Jain says. “Here, we have three different teams, and the team I co-head focuses only on hybrid products.”

Drawing on experience across arbitrage funds, balanced advantage funds, multi-asset funds and equity savings funds, Edelweiss saw an opportunity to enhance returns without adding meaningful risk. The objective, Jain says, was clear: deliver arbitrage plus 2.5–3% returns using strategies that are not permitted within the traditional mutual fund framework.

To achieve this, the strategy does not rely on taking directional short positions. “We are not using derivatives to make money by going short on the market,” Jain clarifies. Instead, the focus is on option writing—covered calls and covered puts—which are permitted only in a limited form in mutual funds. “Here, there is no such restriction,” he says.

The portfolio construction, he explains, combines significant exposure to debt and arbitrage with selective participation in special situations such as IPOs, open offers, mergers and demergers—opportunities that arbitrage funds are not allowed to pursue within the mutual fund structure. “In SIFs, you are allowed to do all these things,” Jain notes.

The goal remains consistent: generate returns modestly above arbitrage through multiple controlled sources. Part of the return comes from higher duration and selective credit exposure, part from option-selling strategies rather than futures, and part from special situations. “It is like an arbitrage-plus-plus strategy,” Jain says.

Edelweiss chose to launch this product first because it aligned closely with the firm’s core strength in hybrid strategies. Jain also points to a structural gap faced by fixed income investors. With changes in debt fund taxation, declining interest rates, and falling absolute returns, traditional fixed income options have lost appeal. While arbitrage funds offer better tax efficiency, returns have moderated, and hybrid funds still carry equity volatility.