Arbitrage Funds on Holiday

Many Mutual Fund Houses of India have stopped more inflow of Fresh Capital into the existing Arbitrage Opportunities Schemes. Well, those who don’t know anything about Arbitrage Funds, let me introduce the Arbitrage Funds First…

Well, Arbitrage Opportunity means the price difference in the Stock price of Current Market price and future market price. Arbitrage Opportunities develop more in Bull Market because the future price of the stocks are selling at Premium Rates but in Bear Market the future price of the stock are trading at Discounted Rates. So during the current market conditions there are very less Arbitrage Opportunities….!!!!

Following are the Arbitrage Funds of India -

01) Kotak Equity Arbitrage

02) UTI Spread

03) ICICI Prudential’s Blended Plans

All of the above Reputed Arbitrage Funds of India are no longer accepting fresh money from the Investors…

Arbitrage schemes are considered as a relatively risk-free, aim to profit from the pricing anomalies between shares and equity futures. They use at least 65% of their fund corpus to take advantage of such pricing anomalies. These hybrid schemes are structured to invest up to 35%of their Corpus in Money market papers such as Certificate of Deposits and Commercial Papers….

Right now the situation is that, if the Arbitrage Funds accept the new money than they can’t give competitive returns because there are very less Arbitrage Opportunities in the Market.In the Bull run, these schemes have given 9-11% return per year but during the current time they are offering just 5-6% returns hardly which is a far cry from Debt Funds.