Arbitrage Mutual Funds

The table below shows a list of the Best Arbitrage Mutual Funds Based on AUM, NAV, and minimum SIP.

Introduction To Arbitrage Mutual Funds

Kotak Equity Arbitrage Fund

Kotak Equity Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Kotak Mahindra Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013. 

Kotak Equity Arbitrage Fund as a credit risk fund, manages assets valued at ₹51569.90 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.1%. This fund has an exit load of  0.25% and an expense ratio of 0.43%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.43%, Debt – 21.72%, and Other – 78.71%.

SBI Arbitrage Opportunities Fund

SBI Arbitrage Opportunities Fund Direct-Growth is an Arbitrage mutual fund scheme from SBI Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

SBI Arbitrage Opportunities Fund as a credit risk fund, manages assets valued at ₹32546.22 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.79%. This fund has an exit load of  0.25% and an expense ratio of 0.43%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity -(-)0.38%, Debt – 25.99%, and Other – 74.39%.

ICICI Pru Equity-Arbitrage Fund

ICICI Prudential Equity Arbitrage Direct-Growth is an Arbitrage mutual fund scheme from ICICI Prudential Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

ICICI Pru Equity-Arbitrage Fund as a credit risk fund, manages assets valued at ₹23541 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.89%. This fund has an exit load of  0.25% and an expense ratio of 0.32%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-0.39)%, Debt – 20.15%, and Other – 80.24%.

Invesco India Arbitrage Fund

Invesco India Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Invesco Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Invesco India Arbitrage Fund as a credit risk fund, manages assets valued at ₹17654.19 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.18%. This fund has an exit load of  0.5% and an expense ratio of 0.39%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.36%, Debt – 20.7%, and Other – 79.66%.

Nippon India Arbitrage Fund

Nippon India Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Nippon India Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Nippon India Arbitrage Fund as a credit risk fund, manages assets valued at ₹15827.40 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.02%. This fund has an exit load of  0.25% and an expense ratio of 0.38%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.4%, Debt – 25.09%, and Other – 75.33%.

HDFC Arbitrage Fund

HDFC Arbitrage Fund Wholesale Direct-Growth is an Arbitrage mutual fund scheme from HDFC Mutual Fund. This fund has been in existence for 10 years and 5 months, having been launched on 26/03/2014. 

HDFC Arbitrage Fund as a credit risk fund, manages assets valued at ₹15819.35 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.74%. This fund has an exit load of  0.25% and an expense ratio of 0.41%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.4%, Debt – 23.1%, and Other – 77.3%.

Aditya Birla SL Arbitrage Fund

Aditya Birla Sun Life Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Aditya Birla Sun Life Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013. 

Aditya Birla SL Arbitrage Fund as a credit risk fund, manages assets valued at ₹13208.82 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.94%. This fund has an exit load of  0.25% and an expense ratio of 0.29%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.11%, Debt – 24.32%, and Other – 75.79%.

Edelweiss Arbitrage Fund

Edelweiss Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Edelweiss Mutual Fund. This fund has been in existence for 10 years and 3 months, having been launched on 12/06/2014.

Edelweiss Arbitrage Fund as a credit risk fund, manages assets valued at ₹12007.18 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.15%. This fund has an exit load of  0.1% and an expense ratio of 0.39%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity – (-)0.41%, Debt -26.68%, and Other -73.74%.

Tata Arbitrage Fund

Tata Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Tata Mutual Fund. This fund has been in existence for 5 years and 9 months, having been launched on 10/12/2018.

Tata Arbitrage Fund as a credit risk fund, manages assets valued at ₹11802.18 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 6.22%. This fund has an exit load of 0.25% and an expense ratio of 0.29%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.35%, Debt – 27.4%, and Other – 72.95%.

Bandhan Arbitrage Fund

Bandhan Arbitrage Fund Direct-Growth is an Arbitrage mutual fund scheme from Bandhan Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Bandhan Arbitrage Fund as a credit risk fund, manages assets valued at ₹6966.70 crore. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 5.86%. This fund has an exit load of  0.25% and an expense ratio of 0.37%. According to SEBI, it falls under the Low-risk category. The fund’s asset allocation comprises: Equity –  (-)0.41%, Debt – 22.47%, and Other – 77.94%.

What Is an Arbitrage Mutual Fund?

An arbitrage mutual fund is a type of investment fund that aims to profit from price discrepancies between markets or securities. It does this by simultaneously buying and selling related assets to exploit these differences. 

These funds typically engage in arbitrage strategies, such as exploiting price differences between the cash market and futures market or between different exchanges. This approach is designed to generate returns with minimal risk.

Arbitrage mutual funds are often considered low-risk investments compared to other equity funds, as they focus on price inefficiencies rather than market movements. However, their returns can be lower due to the conservative nature of the strategy.

Features Of Arbitrage Mutual Funds In India

The main features of arbitrage mutual funds in India include their focus on exploiting price discrepancies, low-risk profile, tax efficiency, and their ability to provide relatively stable returns. These features make them an attractive option for conservative investors.

• Exploiting price discrepancies: Arbitrage mutual funds capitalize on price differences between markets or related securities, aiming to generate profits with minimal risk. This strategy helps in achieving returns even when market conditions are volatile.
• Low-risk profile: These funds are designed to be less volatile compared to traditional equity funds, as they focus on price inefficiencies rather than market fluctuations. This conservative approach helps in minimizing the risk for investors.
• Tax efficiency: In India, arbitrage mutual funds are taxed as equity funds, meaning long-term capital gains are tax-free up to ₹1 lakh per year. This tax benefit enhances the overall returns for investors.
• Stable returns: The strategy employed by arbitrage funds typically results in relatively stable returns, as they do not rely on the broader market trends but rather on the systematic exploitation of price discrepancies.

Best Arbitrage Mutual Funds Based On Expense Ratio

The table below shows the Best-performing Arbitrage Mutual Funds Based on the highest to lowest expense ratio.

Arbitrage Mutual Funds Based On 3Y CAGR

The table below shows the Best Arbitrage Mutual Funds Based on the Highest 3Y CAGR.

Top Arbitrage Mutual Funds India Based On Exit Load

The table below shows Best Performing Arbitrage Mutual Funds In India Based on Exit Load, i.e., the fee that the AMC charges investors when they exit or redeem their fund units.

Arbitrage Mutual Funds Returns

The table below shows Arbitrage Mutual Funds Returns Based on 1-year returns.

Historical Performance Of Arbitrage Mutual Funds

The table below shows the Historical Performance Of Arbitrage Mutual Funds based on 5-year returns.

Factors To Consider When Investing In Arbitrage Mutual Funds

The main factors to consider when investing in arbitrage mutual funds include fund performance, expense ratio, liquidity, and tax implications. Evaluating these aspects helps ensure that the fund aligns with your investment goals and risk tolerance.

• Fund performance: Analyze the historical performance of the arbitrage mutual fund to gauge its ability to generate returns. Consistent performance over time indicates the fund’s effectiveness in exploiting price discrepancies.
• Expense ratio: Consider the fund’s expense ratio, which impacts overall returns. A lower expense ratio means less of your returns are consumed by fees, making it a more cost-effective investment option.
• Liquidity: Assess the liquidity of the fund, which affects how easily you can buy or sell units. High liquidity ensures that you can enter or exit the investment without significant price impact.
• Tax implications: Understand the tax treatment of the fund’s returns. In India, arbitrage mutual funds are taxed as equity funds, providing tax benefits on long-term capital gains, which can enhance net returns.

How To Invest In Arbitrage Mutual Funds?

To invest in arbitrage mutual funds, start by selecting a fund that aligns with your investment goals. Research various funds, considering factors like performance, expense ratios, and risk levels. Look for funds with a proven track record in arbitrage strategies.

Once you’ve chosen a fund, open an investment account with a brokerage platform like Alice Blue. Alice Blue offers a user-friendly interface and comprehensive services for mutual fund investments. Ensure you complete the KYC (Know Your Customer) process to start investing.

After setting up your account, you can invest in the chosen arbitrage mutual fund through Alice Blue’s platform. Monitor your investment regularly and adjust your portfolio as needed to align with your financial goals.

Impact Of Market Trends On Arbitrage Mutual Funds

Market trends can significantly impact arbitrage mutual funds, as they rely on price discrepancies between markets or securities. Bullish or bearish trends can influence the frequency and magnitude of these discrepancies, affecting potential returns.

In a volatile market, arbitrage opportunities might become more frequent, providing more chances for funds to exploit price differences. However, increased market volatility can also lead to higher risks and affect the fund’s stability.

Conversely, stable markets might offer fewer arbitrage opportunities, potentially leading to lower returns. In such conditions, funds may rely on smaller discrepancies, which can affect overall profitability and investment performance.

How Does Arbitrage Mutual Funds Perform In Volatile Markets?

In volatile markets, arbitrage mutual funds can perform well due to increased price discrepancies between markets or securities. These funds exploit these differences to generate returns, often benefiting from heightened volatility that creates more arbitrage opportunities.

However, the increased frequency of trades and the complexity of managing arbitrage strategies can lead to higher transaction costs. This might impact overall returns, although the funds’ inherent risk-hedging strategies can mitigate some of these costs.

Despite potential higher costs, the conservative nature of arbitrage funds generally helps in maintaining stability during volatile periods. Their focus on exploiting inefficiencies rather than market direction can provide relatively stable returns even in turbulent conditions.

Advantages Of Arbitrage Mutual Funds

The main advantages of arbitrage mutual funds include their ability to provide low-risk returns, tax benefits, reduced volatility, and potential for consistent income. These features make them an appealing option for investors seeking stable and risk-managed investment opportunities.

• Low-risk returns: Arbitrage mutual funds focus on exploiting price discrepancies rather than market movements, which generally results in lower risk compared to traditional equity funds. This approach helps preserve capital while generating returns.
• Tax benefits: In India, arbitrage mutual funds are taxed as equity funds, which means long-term capital gains are tax-free up to ₹1 lakh per year. This favorable tax treatment can enhance net returns for investors.
• Reduced volatility: By engaging in arbitrage strategies, these funds aim to minimize the impact of market fluctuations. This results in lower overall volatility, making them suitable for investors seeking stable performance.
• Consistent income: The strategy of capitalizing on price inefficiencies allows arbitrage funds to generate relatively stable and consistent income. This can be particularly beneficial in uncertain or volatile market conditions.

Contribution Of Arbitrage Mutual Funds To Portfolio Diversification

Arbitrage mutual funds contribute to portfolio diversification by adding a low-risk, stable-return component. Their focus on exploiting price discrepancies rather than market direction helps reduce overall portfolio volatility and balance the risk profile of more volatile investments.

Including arbitrage funds in a portfolio can improve risk management and enhance returns. They often perform differently from traditional equity or debt funds, providing additional diversification benefits and potentially mitigating losses during market downturns, thus stabilizing overall portfolio performance.

Who Should Invest In Best Arbitrage Mutual Funds?

Investors seeking lower risk and stable returns should consider the best arbitrage mutual funds. These funds are ideal for conservative investors who want to preserve capital while still aiming for modest returns, especially in volatile or uncertain market conditions.

Additionally, those looking for tax-efficient investment options can benefit from arbitrage mutual funds. With their favorable tax treatment in India and focus on price inefficiencies, these funds are suitable for investors aiming to enhance portfolio stability and tax efficiency.

Impact Of Manager Expertise On Arbitrage Mutual Funds Performance

Manager expertise significantly impacts the performance of arbitrage mutual funds, as experienced managers are better at identifying and exploiting price discrepancies between markets. Their skill in executing trades efficiently can enhance returns and minimize risks associated with arbitrage strategies.

A knowledgeable fund manager can also navigate complex market conditions and optimize the fund’s arbitrage opportunities. This expertise helps in maintaining consistent performance and effectively managing transaction costs, ultimately contributing to the fund’s overall success and stability.

FAQs – Arbitrage Mutual Funds 

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Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change with respect to time The securities quoted are exemplary and are not recommendatory.