The alternative investment environment in India has been undergoing a tremendous change in the last 10 years, where hedge funds have become advanced vehicles of wealth creation among the high-net-worth individuals and institutional investors. India has seen outstanding performance and resilience by the best hedge funds, especially after the introduction of a regulatory framework by SEBI in 2012 that was incorporated in the Alternative Investment Funds (AIF) regulations. By 2026, the Indian hedge fund industry will still be evolving and will provide investors with various strategies, such as long-short equity and market-neutral strategies.
The development of the hedge funds is a huge milestone in the financial markets’ maturation in India. The best hedge funds in India are drawing both local and foreign capital after their assets under management go well beyond several billion dollars and their returns, averaging well in the double digits, outperform traditional investment vehicles.
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What Are Hedge Funds?
Hedge funds are privately held investment funds that utilize sophisticated strategies to make absolute returns irrespective of the market environment. The best hedge funds in India are not traditional mutual funds, but under SEBI regulation, the funds are classified as a Category III Alternative Investment Fund (AIF), and the fund managers are given additional leeway in asset management, leverage, and derivative policies. Such funds are investments of accredited investors and high net worths and the minimum investment in these funds is usually ₹1 crore per investor.
The hedge fund name was coined in reference to hedging to counter market risks. The fund managers use various strategies such as long-short strategies, arbitrage, derivatives, and global macro to maximize risk-adjusted returns and hedge against market declines. Active management of the fund, advanced financial tools, and the capacity to make a profit both in bull and bear markets make the best hedge funds in India appealing to investors seeking returns that are not correlated with conventional asset classes.
Types of Hedge Funds
- Long-Short Equity Funds: Long-term investments in stocks that are undervalued and short-term investments in overvalued securities to make gains on the increasing and decreasing markets without being tied to the market.
- Event-Driven Funds: Take advantage of the events within the company such as mergers, acquisitions, restructurings, and bankruptcies to make profits through price inefficiencies.
- Global Macro Funds: Trade on a global basis using macroeconomic factors and interest rate, currency activity and geopolitical happenings.
- Arbitrage Funds: This is the capitalization of discrepancies of price within related securities in various markets or forms, to create low-risk, steady returns.
- Market Neutral Funds: Have long and short positions that are equal to remove market risk and make returns based solely on stock selection capability.
- Quantitative/Algorithmic Funds: Systematically find trading opportunities using mathematical models, statistical analysis and computer algorithms and implement trading strategies.
Top 10 Hedge Funds in India (2026 List)
| Name | Overview | Strategy | Approx. AUM | Recent Returns |
| Singularity AMC | Founded by Madhu Kela and Yash Kela, focuses on growth capital in tech-driven businesses | Long-only equity with growth focus on Series B-D companies | ₹2,500+ Cr | 22-28% (3-year CAGR) |
| Alchemy Capital | Leading portfolio and asset management firm with expertise in value investing | Long-short equity, concentrated portfolio approach | ₹1,800+ Cr | 18-24% (3-year CAGR) |
| Avendus Absolute Return | Part of Avendus group, focuses on absolute returns with capital preservation | Long-only with bias toward capital preservation | ₹1,200+ Cr | 15-20% (3-year CAGR) |
| Edelweiss Alternative | Diversified alternative strategies under one of India’s leading financial groups | Multi-strategy including growth equity and arbitrage | ₹3,500+ Cr | 16-22% (3-year CAGR) |
| IIFL Alternative | India Infoline’s alternative investment platform with diverse fund offerings | Event-driven and special situations | ₹2,200+ Cr | 14-19% (3-year CAGR) |
| Motilal Oswal AIF | Technology-focused investment approach with strong research capabilities | Equity long-short with sector focus | ₹1,600+ Cr | 17-23% (3-year CAGR) |
| Kotak Alternate Assets | Part of Kotak Mahindra group, offering institutional-grade alternatives | Multi-strategy hedge with derivatives overlay | ₹2,800+ Cr | 15-21% (3-year CAGR) |
| ICICI Prudential AIF | Established player with conservative approach to alternative investments | Market-neutral and arbitrage strategies | ₹1,900+ Cr | 12-16% (3-year CAGR) |
| 360 ONE Asset | Premium wealth and asset management with sophisticated strategies | Global macro and multi-asset allocation | ₹2,400+ Cr | 19-25% (3-year CAGR) |
| True Beacon | Boutique alternative investment firm with concentrated bets | Fundamental long-only with high conviction | ₹1,100+ Cr | 20-26% (3-year CAGR) |
Who Are the Top 3 Hedge Funds?
Singularity AMC:
Singularity is a fund managed by the legendary investor Madhu Kela, who spent his entire tenure at Reliance Capital, where he managed more than 1 lakh crore, with a unique operator mindset for investing in visionary technology-driven companies.
It has the best hedge funds in India due to its deep industry connection, combination of both the public market and private equity experiences, and focus on Series B-D stage companies with capital market prospects.
Edelweiss Alternative:
Edelweiss Alternative is a multi-strategy investment firm with AUM of over ₹3,500 crores and is part of the diversified Edelweiss Financial Services group, which has strong research infrastructure, well-developed risk management, and institutional-level operational processes.
Their diversified growth equity, arbitrage, special situations, and structured products, coupled with proprietary deal flow and market data, make them one of the best hedge funds in India for institutional investors seeking a consistent, risk-adjusted high yield with professional fund management.
Kotak Alternate Assets:
This fund leverages the expertise and trustworthiness of the Kotak Mahindra ecosystem, one of the most reputable financial services conglomerates in India, to provide stable risk-adjusted returns over market cycles with the help of innovative derivative approaches.
Their advanced portfolio construction, strict risk management, seasoned investment team, and ability to tap into diverse investment opportunities make them a favorite among discerning investors in India.
How to Invest in Hedge Funds in India
When investing in the best hedge funds in India, eligibility criteria, investment capacity and risk appetite must be taken into consideration. The regulatory structure provided by SEBI ensures that only advanced investors with sufficient financial means and knowledge of complex investment strategies can invest in hedge funds.
This helps retail investors avoid high-risk investments and allows qualified individuals and institutions to participate in other investment opportunities.
Eligibility Criteria
- High Net Worth Individuals (HNIs): They have to have annual earnings of 1 crore and an investment of ₹5 crore in net worth, with at least ₹2.5 crore found in financial assets in order to be listed as accredited investors.
- Institutional Investors: Banks, insurers, pension funds, endowments having regulatory sanction of respective regulators, and SEBI capable of investing large amounts of money.
- Non-Resident Indians (NRIs): The category is eligible and can be registered on the basis of the FEMA requirements plus the KYC and compliance with the foreign exchange regulations.
- Family Offices and Trusts: It will have to show a reasonable amount of capital, professional management organization and long-term ability to take risks in wealth management.
- Accredited Investors: Qualify as an advanced investor in terms of the financial power, investment experience, and knowledge of the alternative investment risks, as defined under SEBI.
Minimum Investment Requirements
- Minimum (per Investor): ₹1 Crore in Category III AIFs as required by SEBI regulations.
- Employee/Director investment: ₹25 lakhs minimum investment by fund employees and fund directors who have a profound knowledge of fund operations.
- Minimum fund corpus requirement: Each scheme shall have a minimum of ₹20 crores (except in the case of angel funds where the minimum capital required is 10 crores) to have sufficient diversification.
- Lock-in periods: 1-3 years, usually, based on structure and strategy of the fund, although there are funds with quarterly or annual redemption periods.
- Commitment-based investing: There are funds that are run under a capital call mechanism, with the investors making commitments in terms of capital, which is advanced over time as opportunities appear.
Investment Routes
- Direct Investment: Direct approach fund managers invest directly after meeting eligibility requirements, completing exhaustive KYC formalities, and reviewing placement memoranda.
- Via Wealth Managers: Use the services of SEBI-registered wealth and investment advisors who can recommend appropriate hedge funds based on the individual’s risk profile and financial objectives.
- Family Offices: Family-based institutional platforms dealing with ultra-high-net-worth families and multi-generational wealth, having their own investment teams and advisory boards.
- Private Placement: Invest under a private placement memorandum (PPM) after due diligence on the strategy of funds, team, track record, and operational infrastructure.
- Fund of Funds: Invest in diversified funds: investing across various hedge fund strategies, geography and managers to diversify risk and also to select professional managers.
- Platform Investments: New digital strategies that allow accredited investors to access a variety of hedge fund opportunities through simplified documentation and investment strategies.
Hedge Funds in India – Returns & Performance
- Double-Digit Returns: The best hedge funds in India have returned an average of 10-25% in 2025, which is far much better than conventional fixed income.
- Alpha Generation: Best funds produced between 2-5% alpha over benchmark indices using active management and advanced strategies.
- Low Correlation: Low Correlation: Returns have a low level of correlation to the equity markets and this gives a true portfolio diversification in the volatile times.
- Risk-Adjusted Performance: Sharpe ratios of major funds are 1.5-2.5, which shows better returns as compared to volatility taken.
- Stability over Cycles: Top performers continued to have positive returns even during a market correction as a result of hedging and positional trading.
- Strategy-Specific Performance: Quant and market-neutral strategies had produced 12-18% with volatility 4-5 times less than equity markets.
Hedge Funds in India Jobs & Career Paths
- Fund Manager Roles: Senior jobs with 10+ years experience, where you manage a hundred crores portfolio with full investment power.
- Research Analysts: Perform profound fundamental and quantitative research in any industry with a salary of 15-50 lakhs per annum plus performance bonuses.
- Quantitative Analysts: Mathematical models and algorithms of trade strategies, with a salary ranging between ₹20-60 lakhs, and high STEM requirements.
- Risk Management: Track portfolio risks, stress testing, and adherence to regulatory limits, fundamental to fund activities and security of investors.
- Operation and Middle Office: Trade settlements, reconciliation, NAV, and investor reporting: must be done with attention to detail.
- Investor Relations: Report to HNIs and institutional investors and maintain client relationships efficiently.
Hedge Funds vs Mutual Funds
| Feature | Hedge Funds | Mutual Funds |
| Regulation | Category III AIF under SEBI, fewer restrictions | Strictly regulated by SEBI Mutual Fund Regulations |
| Minimum Investment | ₹1 crore per investor | As low as ₹500-1,000 |
| Investor Type | HNIs, institutions, accredited investors only | Open to all retail and institutional investors |
| Investment Strategy | Complex strategies, derivatives, leverage, shorting | Long-only equity and debt, no shorting |
| Liquidity | Lock-in periods of 1-3 years, limited redemption | High liquidity, can redeem daily/weekly |
| Fee Structure | 2% management + 20% performance fee | 0.5-2.5% total expense ratio annually |
| Transparency | Limited disclosure, quarterly reporting | Daily NAV, complete portfolio disclosure |
| Risk Level | High risk, high return potential | Moderate to high risk based on category |
| Taxation | Taxed at fund level, complex structure | Pass-through taxation to investors |
Things to Consider Before Investing in Top Hedge Funds
- Risk Appetite Assessment: Comprehensively assess your personal capacity and readiness to absorb possible losses and volatility, as the best hedge funds in India use aggressive tactics with greater volatility in the short run than traditional investments, but this is generally offset by better long-term risk-adjusted returns.
- Investment Horizon: you must have a real 3-5 years minimum investment commitment because hedge funds generally have lock-in, lack liquidity and cannot be redeemed (unlike liquid mutual funds which can be).
- Fund Manager Track Record: Research thoroughly the experience of the fund manager, his/her record in various market cycles, investment philosophy, decision making, team stability, and reputation of dealing with volatile markets and handling complex situations.
- Fee Structure Impact: Critically compute and compare the annual performance fees of 20% and the 2% annual management fees on your net returns over a period of time, how the fees affect wealth compounding, and whether the performance of the manager is worth the extra fees.
- Strategy Alignment: Choose the funds whose particular investment strategies, asset allocation strategies, risk management schemes, and payoff objectives match your own financial objectives, whether aimed at aggressive growth, consistent income generation, or capital preservation.
- Regulatory Compliance: Before committing large capital, carefully verify SEBI registration, audit audited financial statements, custodians arrangements, compliance with Category III AIF regulation, and full transparency in reporting is proper.
Conclusion
The Indian hedge funds landscape has grown up to a level that provides high-level investors with interesting alternatives to conventional investment vehicles in the last decade. As the healthy regulatory environment in SEBI creates investor protection, transparency, and disciplined operations, hedge funds have become respectable wealth-generation vehicles among HNIs and institutional investors in need of portfolio diversification beyond the standard equity and debt instruments.
The future of the best hedge funds in India is highly promising with many factors coming together in favor of it. The rising economy and wealth concentration of HNIs in India, deeper capital markets, and more tolerance to alternative investments provide an ideal setting of hedge fund development. To qualified investors with the right risk appetite, long-term investment horizon, and sufficient financial resources, pursuing opportunities in the best hedge funds will offer useful portfolio diversification, absolute returns potential, and access to world-leading investment management capabilities in an increasingly complex global investment environment.
FAQs
What is the minimum capital needed in a hedge fund within India?
Hedge funds (Category III AIFs) in India have a minimum investment of ₹1 crore per investor. Nevertheless, employees and fund directors can invest at least ₹25 lakh.
Do hedge funds in India have regulation?
Yes, in India hedge funds are registered by the SEBI in accordance with the Alternative Investment Funds (AIF) Regulations, 2012, as category III AIFs, proving the safety of investors and the transparency of operations.
What are the expected returns of the top hedge funds in India?
The highest performing hedge funds have an average performance of 12-25% per year, but performance cannot be predicted in the future. The returns depend on the fund strategy, market and fund manager experience.
What is the difference between hedge funds and mutual funds?
Hedge funds are intricate in nature, such as: leverage, derivatives, and short-sell; they demand an investment of 1 crore minimum and serve HNIs. All investors can invest in mutual funds, which offer simpler strategies and greater liquidity.
Is it possible that NRIs invest in Indian hedge funds?
Yes, Non-Resident Indians (NRIs) will be able to invest in the best hedge funds in India as per the FEMA regulations and the SEBI regulations, as long as they qualify as accredited investors.