Best Arbitrage Mutual Funds to Invest in April 2024

Best Arbitrage Mutual Funds to Invest
Best Arbitrage Mutual Funds to Invest

Are you seeking investment avenues that offer favourable returns while mitigating risks? Arbitrage funds emerge as a compelling option for astute investors looking to park their funds for a year or longer, aiming for optimal after-tax returns. In the realm of 2024, let’s delve into the finest arbitrage mutual funds that exhibit promising potential.

Also Read: 5 Best Mutual Funds For Retirement Planning in 2024

Understanding Arbitrage Funds

Arbitrage funds operate by capitalizing on price differentials between the cash and derivatives markets. Essentially, fund managers navigate these market variations to extract gains. However, in scenarios where arbitrage opportunities are limited, these funds diversify by investing in debt securities and equities, ensuring a balanced approach to yield growth.

Taxation Benefits

One of the standout advantages of arbitrage funds lies in their taxation structure. Similar to equity schemes, these funds qualify for a long-term capital gains tax of 10% if held for over a year. For shorter durations, a 15% short-term capital gains tax is applicable. This favourable tax treatment adds allure to these investment instruments.

Best Arbitrage Mutual Funds to Invest in 2024

Based on meticulous analysis and stringent parameters, here are the standout arbitrage mutual funds worthy of consideration:

Fund Name1Y ReturnsRatingFund Size (in Cr)
Invesco India Arbitrage Fund8.3%5₹14,592
Tata Arbitrage Fund8.3%5₹10,151
Kotak Equity Arbitrage Fund8.5%4₹39,099
Edelweiss Arbitrage Fund8.4%4₹8,768
Nippon India Arbitrage Fund8.3%4₹13,853
Axis Arbitrage Fund8.1%4₹3,966
Aditya Birla Sun Life Arbitrage Fund8.3%4₹10,668
SBI Arbitrage Opportunities Fund8.3%3₹27,798
Mirae Asset Arbitrage Fund8.3%3₹1,202
ICICI Prudential Equity Arbitrage Fund8.2%3₹17,500

Major Advantages of Arbitrage Mutual Funds

  • Risk and Return: These funds are appealing due to their ability to generate short-term gains through low-risk arbitrage opportunities. They aim to offer higher returns than savings accounts, even in fluctuating market conditions.
  • Tax Efficiency: For taxation purposes, arbitrage funds are treated as equity funds, which is beneficial because these funds allocate at least 65% of their portfolio to equity shares, potentially offering tax advantages over other types of funds.
  • Investment Flexibility: Investors have the option to invest via a lump sum (with a minimum of Rs.1,000) or through a systematic investment plan (SIP) starting at Rs.500. The SIP route allows for regular, fixed investments over time, providing a disciplined approach to investing in arbitrage funds.

Methodology Driving Our Picks

Our selection process involves a rigorous methodology focusing on crucial parameters:

  • Mean Rolling Returns: Computed daily over three years to assess historical performance.
  • Consistency (Hurst Exponent): Gauging the predictability and volatility of fund NAV series.
  • Downside Risk Assessment: Emphasizing negative returns to evaluate risk.
  • Outperformance Metrics (Equity and Debt Portions): Jensen’s Alpha for equity and benchmark comparison for debt portions.
  • Asset Size: Considering funds with a substantial threshold asset size of Rs 50 crore for robustness.

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