Best Arbitrage Funds To Invest

Arbitrage Funds are those mutual funds that earn profits from price differences of the assets in different markets. They purchase and sell shares in cash and futures markets to generate returns when markets highly fluctuate.

Top 5 Arbitrage Funds to invest 

Funds	AUM (Rs.- Cr)	1 Year Returns (%)	3 Year Returns (%)	5 Year Returns (%)
Edelweiss Arbitrage Fund	3,076	7.07	6.94	6.99
Axis Arbitrage Fund	2,421	6.75	6.82	6.95
BNP Paribas Arbitrage Fund	663	6.84	6.86	–
IDFC Arbitrage Fund	6,607	6.28	6.67	6.73
Kotak Equity Arbitrage Fund	12,043	6.40	6.66	6.78

(Source: Value Research, as on May 19, 2020)

1. Edelweiss Arbitrage Fund

Investors who are seeking short term tax efficient returns in comparison to liquid or debt funds and almost risk free income by investing in arbitrage opportunities can go for Edelweiss Arbitrage Funds. It also invests in debt and money market instruments, but primarily gains through arbitrage and buying the basket of index constituents in the Cash or Future segment and selling the Index future.

Funds	1 Year Returns (%)	3 Year Returns (%)	5 Year Returns (%)
Edelweiss Arbitrage Funds	7.07	6.94	6.99
Benchmark	4.21	4.22	4.42

For instance, if you had invested Rs. 50,000 in an arbitrage fund 3 years ago, then at an expected Rate of Returns (ROI) i.e. around 6.94% as on May 19, the wealth created will be Rs. 61,149.17.

2. Axis Arbitrage Fund

A type of equity fund that seeks to generate income through low volatility absolute return strategies taking advantage of opportunities in the cash and the derivative segments of the equity markets. It also capitalizes on the arbitrage opportunities available within the derivative segment, by using other derivative based strategies and by investing the balance in debt and money market instruments.

Funds	1 Year Returns (%)	3 Year Returns (%)	5 Year Returns (%)
Axis Arbitrage Funds	6.75	6.82	6.95
Benchmark	4.21	4.22	4.42

For instance, if you had invested Rs. 50,000 in an arbitrage fund 5 years ago, then at an expected Rate of Returns (ROI) i.e. around 6.95% as on May 19, the wealth created will be Rs. 69,963.89.

3. BNP Paribas Arbitrage Fund

It invests in a diversified portfolio of equity and equity related instruments as well as has exposure debt and fixed income instruments. It makes use of equity derivatives strategies and arbitrage opportunities with the primary investment objective of generating income and capital appreciation.

Funds	1 Year Returns (%)	3 Year Returns (%)
Axis Arbitrage Funds	6.84	6.86
Benchmark	4.21	4.22

For instance, if you had invested Rs. 50,000 in an arbitrage fund 3 years ago, then at an expected Rate of Returns (ROI) i.e. around 6.86% as on May 19, the wealth created will be Rs. 61,012.04.

4. IDFC Arbitrage Fund

It invests primarily in equities and derivative with balance in debt and money market instruments. As all arbitrage funds, it attempts to generate capital appreciation and income through arbitrage opportunities.

Funds	1 Year Returns (%)	3 Year Returns (%)	5 Year Returns (%)
Axis Arbitrage Funds	6.28	6.67	6.73
Benchmark	4.21	4.22	4.42

For instance, if you had invested Rs. 50,000 in an arbitrage fund 5 years ago, then at an expected Rate of Returns (ROI) i.e. around 6.73% as on May 19, the wealth created will be Rs. 69,247.25.

5. Kotak Equity Arbitrage Fund

Capitalizing on price differentials in the cash and futures market, this scheme aims to generate income through arbitrage opportunities that emerges out of pricing anomaly between the spot & futures market; and also through deployment of surplus cash in fixed income instruments.

Funds	1 Year Returns (%)	3 Year Returns (%)	5 Year Returns (%)
Axis Arbitrage Funds	6.40	6.66	6.78
Benchmark	4.21	4.22	4.42

For instance, if you had invested Rs. 50,000 in an arbitrage fund 5 years ago, then at an expected Rate of Returns (ROI) i.e. around 6.78% as on May 19, the wealth created will be Rs. 69,409.61.

How to Invest in Arbitrage Funds

• Offline mode of investing– If you are not confident of your knowledge, you may choose to invest through a broker. However, investing in a fund through a broker will make you eligible for investments through regular plans that offer different returns and varied expenses in investment. If you wish to invest in the fund independently, you must visit the nearest branch of the AMC of your fund. Don’t forget to carry the following documents-
  • Identity Proof (Aadhar Card)
  • Canceled cheque
  • Passport size photos (around 4-5)
  • PAN Card
  • KYC documents (for KYC verification)

• Online mode of investing– If you do not wish to add on to your expense of commissions or brokerage, you may visit online investment platforms such as Paisabazaar.com wherein you can choose from and compare more than 1,700 funds- all in one place, instead of following the long procedure of visiting the website of each AMC and then choosing from them. Here, you can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment

For detailed information on how to invest in mutual funds, click here

Frequently Asked Questions (FAQs)
Q. What is an Arbitrage Fund?

A. An Arbitrage Fund is a mutual fund scheme that leverages through arbitrage opportunities, i.e. earn returns through Price differences of assets in different markets. Read in detail about Arbitrage Funds and how they work.

Q. Are Arbitrage Funds – Equity, Debt or Hybrid Funds?

A. Arbitrage Funds are usually a diversified mix of equity and debt but as about 65% of the corpus is invested in equity and equity related instruments, therefore it is an equity mutual fund. They derive profits from price difference of stocks in cash and futures or derivatives market.

Q. Are Arbitrage Funds tax free? 

A. No, they are not tax free and neither carry tax saving benefits as they are not tax saver funds. They are taxed as Equity Funds.

Q. Can Arbitrage Funds give negative returns?

A. Nothing is guaranteed of the stock prices but they have ability to give high returns in volatile markets deriving returns from price fluctuations. They may under perform in a highly stable market.