The Parag Parikh Arbitrage Fund will invest in a basket of stocks expected to have a positive price difference between the cash and futures market.
PPFAS Mutual Fund has launched the Parag Parikh Arbitrage Fund to provide investors with an opportunity to generate attractive returns by predominantly investing in the cash and derivatives segment and the balance in debt and money market instruments.
The new fund offer (NFO) runs from October 23-27, 2023. The minimum investment amount is Rs. 1,000, and multiples of Rs. 1 after that. The scheme will reopen on November 3, 2023.
According to the fund house, the scheme’s performance will be benchmarked against the Nifty 50 Arbitrage Fund Total Return Index (TRI).
The scheme, to be managed by Rajeev Thakkar, Raunak Onkar, Raj Mehta and Rukun Tarachandani, will offer only ‘Growth Options’ under both direct and regular plans.
Commenting on the product launch, Neil Parag Parikh, Chairman and CEO of PPFAS Mutual Fund, said: “This fund will provide investors with a low-risk, tax-efficient way to generate returns from the arbitrage opportunity in the Indian equity market. The fund can benefit investors in an income tax bracket that benefits from the relatively tax-advantaged status that arbitrage funds enjoy compared to non-equity-oriented funds.”
An Arbitrage fund buys and sells the same asset simultaneously in different markets to profit from the price difference. In the Indian market, there is often a price difference between the cash and futures market; hence, Arbitrageurs can capitalise on this price difference to generate returns. Further explaining the advantages, Rajeev Thakkar, chief investment officer of PPFAS Mutual Fund, said, “An arbitrage fund allows investors to use equity-oriented funds in a low-risk manner. Our traditional equity products require a long-term investment horizon. An arbitrage fund can meet the needs of short to medium-term investors.”
The Parag Parikh Arbitrage Fund will invest in a basket of stocks expected to have a positive price difference between the cash and futures market. Furthermore, the Nifty 50 Arbitrage Fund Total Return Index (TRI) will be the reference point for the fund’s performance.
The fund will invest in arbitrage opportunities to generate returns. For instance, it will predominantly invest in the cash and derivatives segment of the stock market but will also allocate a part to debt and money-market instruments. The scheme comes with a lower risk, as per the fund’s risk-o-meter.