Due Diligence Process for SIF Empanelment

Calmar ratio = annualised return ÷ maximum drawdown. It measures return per unit of drawdown risk. Value above 1.0 indicates the strategy generates more return than its worst drawdown — generally favourable. Long-short funds aiming for absolute returns target Calmar above 0.7-1.0; long-only funds typically have lower Calmar ratios because their drawdowns are larger.

For long-short strategies, the specific PM and senior team matter more than the AMC name. Long-short skill is portable — a strong PM moving to a different AMC may continue delivering, while a new PM at a strong AMC may not replicate the prior team's results. Pay attention to PM-specific track records, not just AMC-aggregate performance.

Hit rate is the percentage of months (or quarters) in which the fund generated positive returns. A hit rate of 65-70% is typical for skilled long-short managers — meaning roughly 7-8 out of every 12 months are positive, with the rest being losses or flat. Higher hit rates indicate more consistent monthly returns; lower hit rates indicate higher variability.

Investor behaviour depends on understanding the strategy. When markets test the strategy (e.g., short-covering rallies hurting the short book), an investor who understands WHY the temporary underperformance is occurring stays the course. An investor who never understood the strategy panics and redeems at the worst possible time. Trustner's framework is to recommend only strategies the investor can articulate back in their own words after the onboarding conversation.

AMC marketing materials and PM presentations naturally emphasise positives. Independent distributors who have managed client relationships in the SIF for 12+ months provide unfiltered feedback on operational reality — RM responsiveness, statement quality, conflict resolution, and client experience during stress events. Three-distributor minimum reduces individual bias. This is a critical input that no document review can substitute for.

Several trigger events: (a) Senior PM departure (especially the lead PM); (b) AMC ownership change with strategic implication; (c) SEBI/AMFI advisory or enforcement action against the AMC; (d) Material strategy drift (e.g., a long-short SIF effectively running long-only); (e) Operational failures (delayed reporting, NAV errors, custodian issues); (f) Material drawdown beyond stated risk parameters with inadequate explanation. Any of these triggers an emergency review and potentially de-empanelment within 1-2 weeks.

Clients are notified of the de-empanelment with the underlying reasoning. The Relationship Manager schedules a review meeting to discuss options: (a) hold to existing redemption window if the fund remains operationally functional; (b) phased exit factoring tax implications; (c) immediate exit if the fund's operational integrity is compromised. Trustner does NOT charge an additional fee for managing exit from a de-empanelled SIF — this is part of the integrated client relationship.

The frameworks are similar in structure (document review, manager engagement, independent verification) but the depth and emphasis differ. AIF diligence is heavier on legal documentation and capital-call mechanics. PMS diligence emphasises portfolio construction discipline and demat-account-level operational quality. SIF diligence emphasises long-short strategy clarity and fee economics. Trustner maintains separate diligence frameworks for each structure type.