This fund is suitable for investors looking for parking their short term money. Moreover dividends are tax-free and there is no incidence of long term capital gains (LTCG) if investments are sold after one year.
What is arbitrage? Let us understand:
Buying and selling of an asset in two different markets simultaneously to earn a price differential is called Arbitrage. This price differential is called as spread or basis. By the expiry of contract, the basis tends to zero and the futures converge to spot irrespective of the market movements. Hence it helps to capitalize on the market inefficiencies and generate profits for the investors.
Key Features of Arbitrage Fund
- Seeks to capture the cash-futures spread in the equity market without getting affected by the market direction
- Aims to generate income through low volatility absolute return strategies
- Invests minimum 65% in the hedged equities and the balance is invested in debt and money market instruments. (Allocation & duration is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets.)
This Product is suitable for Investors who are seeking
- Capital appreciation over medium term.
- Investment in arbitrage opportunities in the cash and derivatives segment of the equity market.
Investors should consult their financial advisers if in doubt about whether the product is suitable for them