{"id":3101,"date":"2025-04-28T12:07:19","date_gmt":"2025-04-28T06:37:19","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=3101"},"modified":"2025-04-28T12:07:22","modified_gmt":"2025-04-28T06:37:22","slug":"best-arbitrage-funds-meaning-features","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/","title":{"rendered":"List of Best Arbitrage Funds in India (2025)"},"content":{"rendered":"\n<p>In the world of investing, finding the right balance between risk and reward is key. While equities offer the potential for higher returns and debt provides stability, some investors look for an option that carefully blends the two. This is where arbitrage mutual funds come in. By taking advantage of price differences between the cash and derivatives markets, these funds aim to deliver equity-like returns with relatively lower volatility. In this blog, let\u2019s explore how arbitrage funds work, the arbitrage funds meaning, features, benefits, taxation and more.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Best-Arbitrage-Funds-in-India\" title=\"Best Arbitrage Funds in India\">Best Arbitrage Funds in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Overview-of-the-Top-Arbitrage-Mutual-Funds\" title=\"Overview of the Top Arbitrage Mutual Funds&nbsp;\">Overview of the Top Arbitrage Mutual Funds&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Invesco-India-Arbitrage-Fund\" title=\"Invesco India Arbitrage Fund\">Invesco India Arbitrage Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Kotak-Equity-Arbitrage-Fund\" title=\"Kotak Equity Arbitrage Fund\">Kotak Equity Arbitrage Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Tata-Arbitrage-Fund\" title=\"Tata Arbitrage Fund\">Tata Arbitrage Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Edelweiss-Arbitrage-Fund\" title=\"Edelweiss Arbitrage Fund\">Edelweiss Arbitrage Fund<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Nippon-India-Arbitrage-Fund\" title=\"Nippon India Arbitrage Fund\">Nippon India Arbitrage Fund<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#What-are-Arbitrage-Funds\" title=\"What are Arbitrage Funds?&nbsp;\">What are Arbitrage Funds?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#How-do-Arbitrage-Funds-Work\" title=\"How do Arbitrage Funds Work?\">How do Arbitrage Funds Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Features-of-Arbitrage-Funds\" title=\"Features of Arbitrage Funds\">Features of Arbitrage Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Who-Should-Invest-in-Arbitrage-Funds\" title=\"Who Should Invest in Arbitrage Funds?\">Who Should Invest in Arbitrage Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Things-to-Consider-While-Investing-in-Arbitrage-Funds-2025\" title=\"Things to Consider While Investing in Arbitrage Funds 2025\">Things to Consider While Investing in Arbitrage Funds 2025<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Arbitrage-Funds-Taxation-as-per-the-Union-Budget-2024-2025\" title=\"Arbitrage Funds Taxation as per the Union Budget 2024-2025\">Arbitrage Funds Taxation as per the Union Budget 2024-2025<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Advantages-of-Investing-in-Arbitrage-Funds\" title=\"Advantages of Investing in Arbitrage Funds\">Advantages of Investing in Arbitrage Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Risks-of-Investing-in-Arbitrage-Funds\" title=\"Risks of Investing in Arbitrage Funds\">Risks of Investing in Arbitrage Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Arbitrage-funds-vs-FD\" title=\"Arbitrage funds vs FD&nbsp;\">Arbitrage funds vs FD&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Conclusion\" title=\"Conclusion&nbsp;\">Conclusion&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#Frequently-Asked-Questions-About-Arbitrage-Funds\" title=\"Frequently Asked Questions About Arbitrage Funds\">Frequently Asked Questions About Arbitrage Funds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#What-is-arbitrage-fund\" title=\"What is arbitrage fund?\">What is arbitrage fund?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#For-how-long-should-you-stay-invested-in-arbitrage-funds\" title=\"For how long should you stay invested in arbitrage funds?\">For how long should you stay invested in arbitrage funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#What-kind-of-returns-can-one-expect-from-arbitrage-funds\" title=\"What kind of returns can one expect from arbitrage funds?\">What kind of returns can one expect from arbitrage funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#What-are-the-risks-associated-with-arbitrage-funds\" title=\"What are the risks associated with arbitrage funds?\">What are the risks associated with arbitrage funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.tickertape.in\/blog\/best-arbitrage-funds-meaning-features\/#How-do-arbitrage-funds-compare-to-debt-funds\" title=\"How do arbitrage funds compare to debt funds?\">How do arbitrage funds compare to debt funds?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Best-Arbitrage-Funds-in-India\"><\/span>Best Arbitrage Funds in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Name<\/strong><\/td><td><strong>AUM (Cr)<\/strong><\/td><td><strong>CAGR 3Y (%)<\/strong><\/td><td><strong>Expense Ratio (%)<\/strong><\/td><td><strong>CAGR 5Y (%)<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/invesco-india-arbitrage-fund-M_INNR?utm_source=blog&amp;utm_medium=article\">Invesco India Arbitrage Fund<\/a><\/td><td>19,675.15<\/td><td>7.66<\/td><td>0.39<\/td><td>6.33<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/kotak-equity-arbitrage-fund-M_KOQU?utm_source=blog&amp;utm_medium=article\">Kotak Equity Arbitrage Fund<\/a><\/td><td>60,373.17<\/td><td>7.56<\/td><td>0.44<\/td><td>6.30<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/tata-arbitrage-fund-M_TARG?utm_source=blog&amp;utm_medium=article\">Tata Arbitrage Fund<\/a><\/td><td>12,789.92<\/td><td>7.45<\/td><td>0.3<\/td><td>6.29<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/edelweiss-arbitrage-fund-M_EDIT?utm_source=blog&amp;utm_medium=article\">Edelweiss Arbitrage Fund<\/a><\/td><td>14,003.17<\/td><td>7.48<\/td><td>0.36<\/td><td>6.25<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/nippon-india-arbitrage-fund-M_NIRE?utm_source=blog&amp;utm_medium=article\">Nippon India Arbitrage Fund<\/a><\/td><td>13,733.37<\/td><td>7.33<\/td><td>0.35<\/td><td>6.17<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/aditya-birla-sl-arbitrage-fund-M_ADTUT?utm_source=blog&amp;utm_medium=article\">Aditya Birla SL Arbitrage Fund<\/a><\/td><td>14,236.09<\/td><td>7.38<\/td><td>0.29<\/td><td>6.14<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/axis-arbitrage-fund-M_AXAB?utm_source=blog&amp;utm_medium=article\">Axis Arbitrage Fund<\/a><\/td><td>5,746.00<\/td><td>7.28<\/td><td>0.31<\/td><td>6.13<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/uti-arbitrage-fund-M_UTGB?utm_source=blog&amp;utm_medium=article\">UTI Arbitrage Fund<\/a><\/td><td>6,614.10<\/td><td>7.29<\/td><td>0.28<\/td><td>6.10<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/bandhan-arbitrage-fund-M_IDFCB?utm_source=blog&amp;utm_medium=article\">Bandhan Arbitrage Fund<\/a><\/td><td>7,877.31<\/td><td>7.40<\/td><td>0.36<\/td><td>6.10<\/td><\/tr><tr><td><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/icici-pru-equity-arbitrage-fund-M_ICCYA?utm_source=blog&amp;utm_medium=article\">ICICI Pru Equity-Arbitrage Fund<\/a><\/td><td>25,726.55<\/td><td>7.33<\/td><td>0.39<\/td><td>6.06<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Note: The data is as of 25th April 2025 and derived using<a href=\"https:\/\/www.tickertape.in\/screener\/mutual-fund?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\"> Tickertape Mutual Fund Screener<\/a> with the following parameters:&nbsp;<\/p>\n\n\n\n<ul>\n<li>Category: Hybrid Funds > Arbitrage Funds<\/li>\n\n\n\n<li><a href=\"https:\/\/www.tickertape.in\/glossary\/cagr\/?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\">CAGR<\/a> 5Y: Sorted from high to low<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overview-of-the-Top-Arbitrage-Mutual-Funds\"><\/span>Overview of the Top Arbitrage Mutual Funds&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Invesco-India-Arbitrage-Fund\"><\/span><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/invesco-india-arbitrage-fund-M_INNR?utm_source=blog&amp;utm_medium=article\">Invesco India Arbitrage Fund<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Invesco India Arbitrage Fund aims to generate income by capitalising on arbitrage opportunities that arise due to price differences between the cash and derivatives markets. Additionally, the fund seeks to enhance returns by investing surplus cash in fixed income instruments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Kotak-Equity-Arbitrage-Fund\"><\/span><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/kotak-equity-arbitrage-fund-M_KOQU?utm_source=blog&amp;utm_medium=article\">Kotak Equity Arbitrage Fund<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Kotak Equity Arbitrage Fund strives to deliver capital appreciation and income by primarily investing in arbitrage opportunities within the cash and derivatives segments of the equity market. The fund also allocates the remaining portion of its portfolio to debt and money market instruments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tata-Arbitrage-Fund\"><\/span><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/tata-arbitrage-fund-M_TARG?utm_source=blog&amp;utm_medium=article\">Tata Arbitrage Fund<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Tata Arbitrage Fund targets reasonable returns by predominantly investing in arbitrage opportunities available in the cash and derivatives segments of the equity markets. As one of the high-return arbitrage funds, it complements this strategy by investing the balance in debt and money market instruments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Edelweiss-Arbitrage-Fund\"><\/span><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/edelweiss-arbitrage-fund-M_EDIT?utm_source=blog&amp;utm_medium=article\">Edelweiss Arbitrage Fund<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Edelweiss Arbitrage Fund seeks to achieve capital appreciation and income by mainly investing in arbitrage opportunities across the cash and derivative segments of the equity markets, as well as within the derivatives segment itself. As one of the top arbitrage mutual funds, it also allocates the balance to debt and money market instruments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Nippon-India-Arbitrage-Fund\"><\/span><a href=\"https:\/\/www.tickertape.in\/mutualfunds\/nippon-india-arbitrage-fund-M_NIRE?utm_source=blog&amp;utm_medium=article\">Nippon India Arbitrage Fund<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Nippon India Arbitrage Fund aims to generate income by leveraging arbitrage opportunities existing between the cash and derivatives markets and within the derivatives segment. As one of the best arbitrage funds for SIP, it also invests in debt securities and money market instruments to complement its core strategy.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-are-Arbitrage-Funds\"><\/span>What are Arbitrage Funds?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Arbitrary, as a word, means something unrestrained or determined by chance rather than a principle or a system. Arbitrage is a trading strategy that involves buying and selling the same or similar assets in different markets to take advantage of price differences. Arbitrage mutual funds take root from a similar situation. At the outset, it may seem to function in an arbitrary manner, but rest assured, mutual funds rarely leave things to chance.&nbsp;<\/p>\n\n\n\n<p>An arbitrage fund takes advantage of the changing price of the securities across different markets to buy and sell the securities simultaneously to pocket the differential. An arbitrage fund may leverage the cash market and the derivative markets to generate returns.&nbsp;<\/p>\n\n\n\n<p>The volatility of the asset decides the value of the returns. Arbitrage funds help the investor make a profit by capitalising on the difference in the price of the present and future securities.<\/p>\n\n\n\n<p>Arbitrage funds are essentially hybrid funds. This means they invest across asset classes like equity and debt in varying proportions. These types of mutual funds appeal to investors who plan to generate revenue out of the volatile equity market but have a portion invested in the safer debt market.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How-do-Arbitrage-Funds-Work\"><\/span>How do Arbitrage Funds Work?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The equity share of company \u2018XYZ\u2019 trades at Rs. 1,500 in the cash market and at Rs. 1,515 in the futures market. The fund manager would buy shares of this company at Rs. 1,500 from the cash market and immediately set a future contract (in the futures market) to liquidate them at Rs. 1,515. When the prices coincide, the sell order of the shares in the future market at Rs. 1,515 is executed. This generates a risk-free return of Rs. 15 for every share, less the transaction costs.&nbsp;<\/p>\n\n\n\n<p>In another situation, let us assume the fund manager feels that the prices may fall in future. They capitalise on the situation and enter into a long contract in the futures market. In such a scenario, they will short-sell your shares at Rs. 1,515 in the cash market. At the time of expiry, they will also execute a buy order of the shares at Rs. 1,500 in the futures market to earn a profit of Rs. 15 per share and cover their position.&nbsp;<\/p>\n\n\n\n<p>Another way of working with arbitrage funds is that you have the option of purchasing an equity share of Rs. 100 at the NSE and liquidating it at the<a href=\"https:\/\/www.tickertape.in\/stocks\/bse-BSEL?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\"> BSE<\/a> at Rs. 120 to get a profit without taking any risk.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Features-of-Arbitrage-Funds\"><\/span>Features of Arbitrage Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s have a look at the key features of arbitrage funds:<\/p>\n\n\n\n<ul>\n<li>Arbitrage funds are mutual funds that come with the purpose of providing their investors with a balance of risk and return.\u00a0<\/li>\n\n\n\n<li>These are actively managed funds and generate profit by trading on different stock exchanges.<\/li>\n\n\n\n<li>These types of funds are not affected negatively by fluctuations in market prices.<\/li>\n\n\n\n<li>They keep their investors stress-free because the buying and selling prices are already known to the fund manager, turning the market uncertainty and instability into a blessing for the investors.\u00a0<\/li>\n\n\n\n<li>Arbitrage funds help investors avoid a majority of the risks associated with equity market volatility while giving investors the opportunity of investing in equity.<\/li>\n\n\n\n<li>Another very important feature of arbitrage investment is that they are very popular among investors with low-risk capacity.\u00a0\u00a0<\/li>\n\n\n\n<li>When the arbitrage fund performance is low, the fund manager allocates a part of the pooled investor capital into choice debt instruments that would generate a profit and have a high credit quality, like debentures, government bonds and term deposits.<\/li>\n<\/ul>\n\n\n\n<p>So the money is always working in a safer environment to grow into a corpus over time. Short-term arbitrage funds may be volatile but have historically returned at par with liquid funds over the long term.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who-Should-Invest-in-Arbitrage-Funds\"><\/span>Who Should Invest in Arbitrage Funds?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As we have seen, the primary feature of arbitrage funds is that they encash low-risk buy-and-sell deals in the futures and cash markets. You can easily equate the level of risk involved in these funds with the risk involved in pure debt funds.<\/p>\n\n\n\n<p>Therefore, low-risk arbitrage funds are best suited for investors who wish to take advantage of the equity market without having to deal with the high risk associated with it. Thus, if you are someone who is averse to risk but exploring options to generate higher returns than from the debt market, arbitrage mutual fund options may be considered and take advantage of the market fluctuations.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things-to-Consider-While-Investing-in-Arbitrage-Funds-2025\"><\/span>Things to Consider While Investing in Arbitrage Funds 2025<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are certain crucial things that you need to take care of as an investor are:<\/p>\n\n\n\n<ul>\n<li><strong>Risk involved:<\/strong> As there is no second party involved in this trade and it is conducted solely on the stock market, it is free of counterparty risks. You are not exposed to price fluctuations in equities, even when selling or buying shares in cash or future markets. However, all investments are subject to market risk, and returns are not guaranteed.<\/li>\n\n\n\n<li><strong>Return:<\/strong> Arbitrage funds for returns can actually get you a decent profit if you can pick the right fund to invest in. Traditionally, these funds have given investors 7-8% returns over a time span of 5-10 yrs. Though there is no guarantee of the returns on these funds, they are great, low-risk options in a volatile market.<\/li>\n\n\n\n<li><strong>Cost of investment: <\/strong>You will have to bear a cost when investing in hybrid arbitrage funds, known as the expense ratio. It is an annual fee that mutual funds charge towards the management of your money. Expressed as a percentage of the assets of the fund, it includes the fund management charges, fund manager fees, administration, research and communication charges, and commissions and brokerages. High-return arbitrage funds may levy an extra load for 30 to 60 days, which would further add to the expense ratio of your fund.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Arbitrage-Funds-Taxation-as-per-the-Union-Budget-2024-2025\"><\/span>Arbitrage Funds Taxation as per the Union Budget 2024-2025<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Arbitrage funds are treated just as equity funds for the purpose of arbitrage fund taxation. You make short-term capital gains (STCG) if you stay invested for a time period of less than a year, which are taxable at the rate of 20%. Your gains will be considered long-term capital gains (LTCG) if you stay invested for more than a year. Such LTCG on arbitrage funds are taxed at 12.5% without any indexation benefits.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages-of-Investing-in-Arbitrage-Funds\"><\/span>Advantages of Investing in Arbitrage Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The key benefits of arbitrage funds are listed below:<\/p>\n\n\n\n<ul>\n<li><strong>Low risk: <\/strong>The primary benefit of high-potential arbitrage funds is that they rank very low in the risk-o-metre. The buying and selling rates are already known to the fund manager, who can manage associated risks. A part of arbitrage funds also goes to debt securities, which are usually very stable.<\/li>\n\n\n\n<li><strong>Liquidity and lock-in: <\/strong>There is no long-term commitment involved as the securities are simultaneously bought and sold. However, given the higher exit load charges, it may make sense to stay invested for at least three months in a volatile market period. That said, all funds tend to perform the best over the long term.<\/li>\n\n\n\n<li><strong>Taxed as equity funds: <\/strong>Arbitrage funds invest primarily in equities. This is why they are taxed as equity funds, and the tax rate is much lower for them than the ordinary income tax rate levied on other types of funds, such as gold ETFs or debt funds.\u00a0<\/li>\n\n\n\n<li><strong>Balanced funds:<\/strong> Another benefit of arbitrage funds is that they are balanced funds and are a hybrid of both debt and equity, with a focus on equity, thus capturing the benefits of both asset classes.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risks-of-Investing-in-Arbitrage-Funds\"><\/span>Risks of Investing in Arbitrage Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While arbitrage funds are considered relatively stable compared to equity funds, they are not devoid of risks. Before choosing the top arbitrage funds for your portfolio, it\u2019s essential to understand the following risks:<\/p>\n\n\n\n<ol>\n<li><strong>Market Liquidity Risk: <\/strong>Arbitrage fund strategies for returns depend on the availability of price differences between cash and derivatives markets. Low liquidity in either market can hinder the execution of trades and adversely impact arbitrage funds returns.<\/li>\n\n\n\n<li><strong>Interest Rate and Credit Risk: <\/strong>Arbitrage funds are hybrid funds that invest a portion of their assets in debt instruments, typically in term deposits or very short-term debt. While interest rate and credit risks exist, these risks are generally minor due to the nature of the best arbitrage funds India.<\/li>\n\n\n\n<li><strong>Low-Return Potential in Flat Markets:<\/strong> Arbitrage opportunities are scarce when markets are trading flat or exhibit low volatility. In such conditions, arbitrage funds may deliver below-average returns, which is one of the most notable risks associated with these funds.<\/li>\n\n\n\n<li><strong>Expense Ratio Impact: <\/strong>Even the top arbitrage mutual funds rely on executing a high volume of trades to capitalise on price differences, which can lead to relatively high expense ratios. These costs can erode the arbitrage fund returns, especially in periods of limited arbitrage opportunities.<\/li>\n\n\n\n<li><strong>Settlement Risk: <\/strong>The smooth execution of arbitrage fund strategies relies on timely settlement between cash and derivatives markets. Any delays or discrepancies in settlement can affect the fund\u2019s overall performance.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Arbitrage-funds-vs-FD\"><\/span>Arbitrage funds vs FD&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here\u2019s a table to explain the difference between arbitrage funds and Fixed Deposits (FD).&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Feature<\/td><td>Arbitrage Fund<\/td><td>FD<\/td><\/tr><tr><td>Returns<\/td><td>Returns are linked to the market. Hence not guaranteed.<\/td><td>Assured returns based on the bank\/financial institution rate.&nbsp;<\/td><\/tr><tr><td>Risk<\/td><td>High risk compared to FDs<\/td><td>Low-risk<\/td><\/tr><tr><td>Taxation<\/td><td>STCG is taxed at 15%, and LTCG is taxed at 10%.&nbsp;<\/td><td>The interest earned is added to the investor\u2019s income and taxed as per their income tax slab.&nbsp;<\/td><\/tr><tr><td>Premature withdrawal<\/td><td>An exit load is levied if the fund is withdrawn within 30 or 60 days of buying.<\/td><td>A premature withdrawal fee is levied as per the bank\/financial institution\u2019s norms.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Overall, arbitrage funds come with both pros and cons. It is important for an investor to analyse and understand the working of a fund before investing. Use<a href=\"https:\/\/www.tickertape.in\/screener\/mutual-fund?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\"> Tickertape Mutual Fund Screener<\/a> to analyse different mutual funds available in the market. Once you\u2019ve invested in your preferred fund, use<a href=\"https:\/\/www.tickertape.in\/portfolio\/mutualfunds?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\"> Tickertape Mutual Fund Portfolio<\/a>, which can help to keep an eye on the fund with crucial parameters.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently-Asked-Questions-About-Arbitrage-Funds\"><\/span><strong>Frequently Asked Questions About Arbitrage Funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1681186523563\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What-is-arbitrage-fund\"><\/span><strong>What is arbitrage fund?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Arbitrage funds are hybrid funds that generate returns by simultaneously buying and selling securities in different markets to make use of different prices.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1681186530298\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"For-how-long-should-you-stay-invested-in-arbitrage-funds\"><\/span><strong>For how long should you stay invested in arbitrage funds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Given its volatility in the short run and to save on taxes, you can stay invested in arbitrage funds for more than a year. However, it is important to consider your investment objective and stay invested accordingly.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1739365247458\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What-kind-of-returns-can-one-expect-from-arbitrage-funds\"><\/span>What kind of returns can one expect from arbitrage funds?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Returns are generally moderate and depend on the availability of arbitrage opportunities, which are more prevalent in volatile markets.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1739365257587\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What-are-the-risks-associated-with-arbitrage-funds\"><\/span>What are the risks associated with arbitrage funds?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>While considered low-risk, they may underperform in stable markets with fewer arbitrage opportunities and can have higher expense ratios due to frequent trading.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1739365262218\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"How-do-arbitrage-funds-compare-to-debt-funds\"><\/span>How do arbitrage funds compare to debt funds?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Arbitrage funds have a risk profile similar to debt funds but are taxed as equity funds, potentially offering better post-tax returns for short-term investments.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Here\u2019s a list of the best arbitrage funds for 2025. Explore top performing arbitrage mutual funds, their features, benefits, returns, taxation and more.<\/p>\n","protected":false},"author":90,"featured_media":3105,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1750,1721],"tags":[],"acf":[],"modified_by":"vanessa sequeira","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/07\/MF-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3101"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/90"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=3101"}],"version-history":[{"count":16,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3101\/revisions"}],"predecessor-version":[{"id":16932,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3101\/revisions\/16932"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/3105"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=3101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=3101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=3101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}