Mutual funds are of several types. If you are wondering what is arbitrage fund, then the answer is it is a type of mutual fund. It makes profits by buying a stock at one stock exchange and selling the stock for a higher value at a different stock exchange. Thus, there is a simultaneous purchase and sale of units. They usually consist of equities but debt and money market equities can also make up a small portion.
You can buy a close ended mutual fund at a discount and sell it at a premium on a different exchange. Since this difference is not substantial, you need to buy and sell a large number of stocks to make a significant profit.
If the prospects of arbitrage funds have you excited, here is a list of the top funds to invest in.
Axis Enhanced Arbitrage Fund
This arbitrage fund aims for absolute returns to create a source of income. It capitalises on the derivatives as well as cash segments of equity mutual funds. If there are any balances left, the amount is invested in debt and money market securities to earn short-term returns. It has an annualised return of 7.04%.
ICICI Prudential Equity Arbitrage Fund
The objective of this arbitrage fund is to generate returns that are less volatile. To do this, it uses derivatives of the equity market. Secondary investments from short-term investments in debt and money market funds also form a small portion of the portfolio. The fund was able to reap consistent annualised returns of 6.9% in the past few years.
Kotak Equity Arbitrage Fund
Despite being new to the mutual fund market in India, it is a low-risk option that attracts many. It has proven itself as a strong and consistent performer. The annualised return is 6.85%. If your goal is capital appreciation, this is among the best funds to choose.
L&T Arbitrage Opportunities Fund
With an annualised return of 6.83%, the performance of this fund has been remarkable over the past years. The returns are generated mostly from equities, but there is a fair percentage of debt and money market securities too.
Aditya Birla Sun Life Enhanced Arbitrage Fund
It is among the top hybrid mutual funds that are heavily dependent on equities. It exploits opportunities of earning profits on the differential valuation of securities in different markets. This fund has outperformed itself over the past years and you can expect annualised returns of 6.73%.
Invesco India Arbitrage Fund
The main source of income for this fund is the gap in prices between the cash and derivative markets. It also uses debt and money market units to provide a source of additional income. Previous performance has shown annualised returns of 6.7%.
HDFC Arbitrage Fund
Use your extra cash in debt and money market instruments to generate income. This arbitrage fund has overshot its benchmark and has been providing annualised returns of 6.52%. With consistent performance and clear growth, it is definitely among the best arbitrage funds to invest in.
Now that you know exactly what is arbitrage fund and how investing in it can earn create a source of income, all you need to do is use this list to select the perfect arbitrage fund to suit your need. Leave the rest to the fund manager and watch your money grow!
mutual fund investment app 