Best Arbitrage Mutual Funds to Invest in 2024

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

Are you seeking investment avenues that offer favorable 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 favorable 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:

  1. Kotak Equity Arbitrage Fund: Renowned for its consistency in delivering favorable mean rolling returns over the last three years. This fund has demonstrated resilience, leveraging market opportunities effectively.
  2. Nippon India Arbitrage Fund: Another noteworthy contender that has consistently showcased commendable performance. Its ability to navigate market fluctuations and seize arbitrage opportunities makes it a compelling choice.

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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