Arbitrage funds leverage the price difference of equity shares between two markets to generate maximum returns for investors. Fund managers of these schemes buy shares in the cash market and sell them in the derivatives market simultaneously. One can calculate returns earned by the best arbitrage mutual funds by subtracting the cost price from the selling price. These funds fall under the category of hybrid funds as they invest a significant portion of the corpus in debt instruments.
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| Fund Name | Category | Risk | 1Y Returns | Rating | Fund Size(in Cr) |
|---|---|---|---|---|---|
Invesco India Arbitrage Fund | Hybrid | Low | 8.0% | 5 | ₹6,983 |
Edelweiss Arbitrage Fund | Hybrid | Low | 7.7% | 5 | ₹6,675 |
Tata Arbitrage Fund | Hybrid | Low | 7.7% | 5 | ₹7,150 |
Kotak Equity Arbitrage Fund | Hybrid | Low | 7.8% | 4 | ₹25,860 |
Nippon India Arbitrage Fund | Hybrid | Low | 7.7% | 4 | ₹10,408 |
Axis Arbitrage Fund | Hybrid | Low | 7.4% | 4 | ₹2,790 |
Aditya Birla Sun Life Arbitrage Fund | Hybrid | Low | 7.6% | 4 | ₹5,406 |
SBI Arbitrage Opportunities Fund | Hybrid | Low | 7.9% | 3 | ₹17,701 |
ICICI Prudential Equity Arbitrage Fund | Hybrid | Low | 7.6% | 3 | ₹12,496 |
Bandhan Arbitrage Fund | Hybrid | Low | 7.7% | 3 | ₹3,931 |
Mirae Asset Arbitrage Fund | Hybrid | Low | 7.5% | 3 | ₹381 |
UTI Arbitrage Fund | Hybrid | Low | 7.5% | 3 | ₹3,145 |
HSBC Arbitrage Fund | Hybrid | Low | 7.5% | 3 | ₹1,700 |
Baroda BNP Paribas Arbitrage Fund | Hybrid | Low | 7.6% | 3 | ₹330 |
DSP Arbitrage Fund | Hybrid | Low | 7.7% | 3 | ₹2,182 |
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Here are some characteristics of arbitrage funds:
Asset allocation: As per the Securities and Exchange Board of India (SEBI) rules, arbitrage funds must invest at least 65% in equity shares of companies. The remaining portion of the portfolio primarily comprises debt instruments.
Risk-reward ratio: The portfolio of top arbitrage mutual funds includes investment in fixed-income generating instruments, which makes these less risky than equity funds. Nevertheless, since arbitrage opportunities do not arise frequently, the returns generated are not that high.
Short-term Capital Gains Tax: If investors sell their units within a year from the date of purchase, short term capital gains tax of 15% is applicable on such proceeds.
Long-term Capital Gains Tax: For long-term capital gains – profits from the sale of units with a holding period of more than 1 year – 10% tax is applicable on the amount exceeding Rs.1 lakh. Please note that investors do not have to pay tax on gains of up to Rs.1 lakh.
As mentioned earlier, the risk level associated with these funds is quite similar to that of debt funds. Hence, these suit investment objectives with a risk-averse outlook but with equity exposure. These funds have the potential to minimise risk and be less impacted in case of persistent market fluctuations. Nevertheless, it’s vital for investors to take certain aspects into account before investing in the best arbitrage mutual fund. Let’s take a look at them in detail.
Investment objective: The investment objectives of individuals tend to vary. If a mutual fund scheme appears to be the best option for one investor, it might not be suitable for another. That’s why it’s crucial that prospective investors identify their financial goals first before allocating their savings to an arbitrage mutual fund.
Risk appetite: It’s essential for investors to assess their risk profile before choosing to invest in the best arbitrage mutual funds.
Expense ratio: This is a maintenance charge levied annually by a fund house on investors to finance its expenses. It is a small percentage of the fund’s total assets. When choosing an arbitrage fund, investors must make sure to compare the expense ratio of the best arbitrage mutual funds 2023.
Direct or regular plan: Investors can opt for a direct plan from an asset management company directly. There’s no involvement of brokers, distributors or any other third party. However, to subscribe to a regular plan, individuals must invest via intermediaries, which involves commission and brokerage. Hence, regular plans report a lower NAV and also have a comparatively higher expense ratio than direct plans.
Past performance of the fund: It’s vital for individuals to check the historical returns of an arbitrage fund to get an idea about its past performance. By analysing the performance, they can understand whether the fund has been able to achieve its goal thus far. Evaluating this factor also offers insights into a scheme’s graph of returns in response to different market conditions.
Exit load: Exit load refers to the fee that an asset management company charges if an investor redeems his/her units from a mutual fund scheme partially or fully within a pre-specified time frame. Investors must ensure not to confuse this with the expense ratio. They can avoid paying this fee by not redeeming their units within a certain period. However, paying the expense ratio on a yearly basis is mandatory.
Track record of the fund manager: Fund managers of the best arbitrage mutual funds make the most of arbitrage opportunities and generate maximum returns for investors. However, this requires extensive knowledge, specialised skills, and thorough research and analysis. Hence, it’s vital to check the experience and track record of a fund manager.
Here are some benefits of investing in the best arbitrage mutual funds:
Minimal risk: Arbitrage funds can generate short-term returns by taking advantage of low-risk buy-and-sell opportunities that may arise.
Higher returns than savings accounts: Arbitrage funds have the capacity to generate higher returns than a savings deposit account. They can also generate stable returns in volatile market conditions.
Taxed as equity funds: Arbitrage funds are treated as equity funds for taxation purposes. It’s because these funds invest at least 65% of their assets in equity shares.
Choice of investment route: Investors can either choose the lump sum mode or systematic investment plan (SIP) option to allocate their funds to an arbitrage mutual fund. The former allows individuals to invest the entire amount in a fund all at once. By opting for the SIP route, one can invest in the best arbitrage mutual funds by paying fixed instalments at regular intervals. While the lump sum mode requires an individual to invest at least Rs.1,000, one needs Rs.500 to start investing via the SIP route.
Now let us jump and check about these top 15 mutual fund schemes.
Fund Performance: The Invesco India Arbitrage Fund has given 5.72% annualized returns in the past three years and 5.82% in the last 5 years. The Invesco India Arbitrage Fund belongs to the Hybrid category of Invesco Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Invesco India Arbitrage Fund via lump sum is ₹1,000 and via SIP is ₹500.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹6,983Cr |
| 1Y Returns | 8.0% |
Fund Performance: The Edelweiss Arbitrage Fund has given 5.6% annualized returns in the past three years and 5.92% in the last 5 years. The Edelweiss Arbitrage Fund belongs to the Hybrid category of Edelweiss Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Edelweiss Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹6,675Cr |
| 1Y Returns | 7.7% |
Fund Performance: The Tata Arbitrage Fund belongs to the Hybrid category of Tata Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Tata Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹150.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹7,150Cr |
| 1Y Returns | 7.7% |
Fund Performance: The Kotak Equity Arbitrage Fund has given 5.62% annualized returns in the past three years and 5.78% in the last 5 years. The Kotak Equity Arbitrage Fund belongs to the Hybrid category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Equity Arbitrage Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹25,860Cr |
| 1Y Returns | 7.8% |
Fund Performance: The Nippon India Arbitrage Fund has given 5.51% annualized returns in the past three years and 5.82% in the last 5 years. The Nippon India Arbitrage Fund belongs to the Hybrid category of Nippon India Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Nippon India Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹10,408Cr |
| 1Y Returns | 7.7% |
Fund Performance: The Axis Arbitrage Fund has given 5.47% annualized returns in the past three years and 5.74% in the last 5 years. The Axis Arbitrage Fund belongs to the Hybrid category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Arbitrage Fund via lump sum is ₹500 and via SIP is ₹100.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹2,790Cr |
| 1Y Returns | 7.4% |
Fund Performance: The Aditya Birla Sun Life Arbitrage Fund has given 5.43% annualized returns in the past three years and 5.69% in the last 5 years. The Aditya Birla Sun Life Arbitrage Fund belongs to the Hybrid category of Aditya Birla Sun Life Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Arbitrage Fund via lump sum is ₹1,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹5,406Cr |
| 1Y Returns | 7.6% |
Fund Performance: The SBI Arbitrage Opportunities Fund has given 5.51% annualized returns in the past three years and 5.55% in the last 5 years. The SBI Arbitrage Opportunities Fund belongs to the Hybrid category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Arbitrage Opportunities Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹17,701Cr |
| 1Y Returns | 7.9% |
Fund Performance: The ICICI Prudential Equity Arbitrage Fund has given 5.4% annualized returns in the past three years and 5.64% in the last 5 years. The ICICI Prudential Equity Arbitrage Fund belongs to the Hybrid category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Equity Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹12,496Cr |
| 1Y Returns | 7.6% |
Fund Performance: The Bandhan Arbitrage Fund has given 5.38% annualized returns in the past three years and 5.64% in the last 5 years. The Bandhan Arbitrage Fund belongs to the Hybrid category of IDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Bandhan Arbitrage Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹3,931Cr |
| 1Y Returns | 7.7% |
Fund Performance: The Mirae Asset Arbitrage Fund belongs to the Hybrid category of Mirae Asset Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹381Cr |
| 1Y Returns | 7.5% |
Fund Performance: The UTI Arbitrage Fund has given 5.36% annualized returns in the past three years and 5.67% in the last 5 years. The UTI Arbitrage Fund belongs to the Hybrid category of UTI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in UTI Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹3,145Cr |
| 1Y Returns | 7.5% |
Fund Performance: The HSBC Arbitrage Fund has given 5.31% annualized returns in the past three years and 5.65% in the last 5 years. The HSBC Arbitrage Fund belongs to the Hybrid category of HSBC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in HSBC Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,700Cr |
| 1Y Returns | 7.5% |
Fund Performance: The Baroda BNP Paribas Arbitrage Fund has given 5.3% annualized returns in the past three years and 5.63% in the last 5 years. The Baroda BNP Paribas Arbitrage Fund belongs to the Hybrid category of BNP Paribas Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹330Cr |
| 1Y Returns | 7.6% |
Fund Performance: The DSP Arbitrage Fund has given 5.22% annualized returns in the past three years and 5.58% in the last 5 years. The DSP Arbitrage Fund belongs to the Hybrid category of DSP Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in DSP Arbitrage Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹2,182Cr |
| 1Y Returns | 7.7% |
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