Investment Objective
Kotak Arbitrage Fund, formerly Kotak Equity Arbitrage Fund, seeks to generate capital appreciation and income by primarily investing in arbitrage opportunities in the cash and derivatives segment of the equity market and by investing the residual in debt and money market instruments.
Investment Strategy
- The fund invests in arbitrage opportunities, focusing on price differences between the spot and futures markets of exchange traded equities, as well as other arbitrage opportunities within the derivatives segment. If suitable arbitrage opportunities are not available, the scheme may predominantly invest in debt and money market securities.
- It takes long positions in the cash segment and exactly off-setting short positions in the future segment.
- The equity position is fully hedged at the time of trade initiation.
- As derivatives contracts approach expiry, positions are either reversed or rolled over, provided a spread is available for the next month.
Who Should Invest
- Investors having 3 months to 6 months investment horizon and seeking to generate returns from arbitrage opportunities in the equity market.
- Those seeking to invest in the arbitrage opportunities available in cash and derivative segments of the equity market.