Hedge Funds in India: Complete Guide to the Top 10 Best Performers

What is a Hedge Fund?

Hedge funds have long been popular among high-net-worth investors in the US and Europe, but in recent years, they have also made their presence felt in India. These investment vehicles are known for their flexibility, aggressive strategies, and potential to generate higher returns compared to traditional mutual funds. However, hedge funds also come with higher risks and entry barriers.

In this article, Ultra will walk you through everything you need to know about Indian hedge funds — including what they are, how they work, and our curated list of the top hedge funds in India for 2025.

A hedge fund is a privately managed investment pool that uses a variety of strategies to generate returns for its investors. Unlike mutual funds, hedge funds are not bound by strict regulations on investment choices, allowing fund managers to invest in equities, derivatives, commodities, currencies, and even alternative assets.

Key characteristics of hedge funds:

• High Minimum Investment: Typically ₹1 crore or more in India.

• Sophisticated Strategies: Can include short selling, arbitrage, derivatives trading, and leverage.

• Accredited Investors Only: Usually open to institutional investors and high-net-worth individuals (HNIs).

• Performance-Linked Fees: Fund managers often charge a fixed fee plus a percentage of profits.

Hedge Funds in India: Regulatory Framework

In India, hedge funds fall under the Category III Alternative Investment Funds (AIFs) regulated by the Securities and Exchange Board of India (SEBI). This ensures a certain level of oversight while still allowing the funds flexibility in their investment strategies.

Why Do Investors Choose Hedge Funds?

• Diversification — Access to a wide range of asset classes beyond stocks and bonds.

• Aggressive Returns — Potential for higher gains in both rising and falling markets.

• Expert Management — Run by experienced fund managers with specialized strategies.

• Flexibility — Ability to take advantage of market inefficiencies.

Risks of Investing in Hedge Funds

While hedge funds offer opportunities, they are not for everyone. Risks include:

• High Volatility — Potential for significant losses.

• Low Liquidity — Lock-in periods can be longer than mutual funds.

• Complex Strategies — Can be difficult for retail investors to understand.

• High Fees — Management and performance fees can reduce net returns.

Top 10 Hedge Funds in India (2025)

Here is a list of some of the best hedge funds in India based on reputation, management quality, and performance track record.

(Note: Returns vary and past performance does not guarantee future results.)

1. Avendus Absolute Return Fund

• Strategy: Market-neutral and arbitrage strategies.

• Known for consistent performance and low correlation with equity markets.

2. ASK India Opportunities Fund

• Focuses on long-term value investing in Indian equities.

• Managed by ASK Investment Managers.

3. ICICI Prudential PMS & AIF Hedge Fund Strategies

• Offers both directional and market-neutral strategies.

• Backed by ICICI’s strong research capabilities.

4. IIFL Special Opportunities Fund

• Focuses on event-driven strategies.

• Popular among HNIs seeking high-growth opportunities.

5. Alchemy High Growth Fund

• Known for high-conviction stock picks in emerging sectors.

• Managed by experienced market veterans.

6. Motilal Oswal IBEF (India Business Excellence Fund)

• Targets growth-stage companies.

• Focus on value creation over the long term.

7. Edelweiss Multi Strategy Fund

• Uses a mix of arbitrage, long-short equity, and fixed-income strategies.

8. Helios Strategic Fund

• Run by former Enam Asset Management executives.

• Employs long-short equity strategies.

9. Old Bridge Capital Partners Funds

• Founded by former IDFC MF fund manager Kenneth Andrade.

• Focuses on high-quality mid-cap companies.

10. Tata Alternative Investment Fund – Category III

• Backed by the Tata Group’s strong credibility.

• Uses diversified, multi-asset strategies.

How to Invest in Hedge Funds in India

If you are considering investing in a hedge fund in India, here’s the process:

• Check Eligibility — You must qualify as an accredited investor (usually HNIs or institutions).

• Select a SEBI-Registered Fund — Ensure the fund is registered under Category III AIF.

• Understand the Strategy — Know the risk profile and investment approach.

• Review Fee Structure — Look into both management fees and performance-based fees.

• Sign the Agreement — Complete KYC and documentation.

Taxation of Hedge Funds in India

• Category III AIFs are generally taxed at the fund level.

• Short-term capital gains (STCG) and long-term capital gains (LTCG) apply depending on the asset class.

• Consult a tax advisor before investing to understand post-tax returns.

Ultra’s Perspective on Indian Hedge Funds

At Ultra, we see hedge funds as an advanced investment option suitable for experienced investors with a high risk tolerance. While they can offer attractive returns, they also require careful selection, thorough research, and patience.

For those looking to diversify beyond traditional assets, exploring top hedge funds in India could be worthwhile — but only as a part of a well-balanced portfolio.

FAQs on Hedge Funds in India

Q1. What is the minimum investment in an Indian hedge fund?

Typically ₹1 crore for Category III AIFs.

Q2. Are hedge funds regulated in India?

Yes, by SEBI under the Alternative Investment Fund Regulations.

Q3. Who can invest in hedge funds in India?

Primarily high-net-worth individuals (HNIs), institutional investors, and family offices.

Q4. Which is the best hedge fund in India?

Funds like Avendus Absolute Return Fund and ASK India Opportunities Fund are among the top performers, but the “best” depends on your investment goals.

Q5. Are hedge funds risky?

Yes. They employ complex strategies that can result in significant gains or losses.