Franklin Templeton (India) on November 4, 2024 launched a hybrid arbitrage fund, the Franklin India Arbitrage Fund (FIAF). It seeks to capitalise on arbitrage opportunities in the cash and derivative segments of the equity market.
NFO Details
The new fund offer (NFO) will run from November 4-18, 2024, during which units will be available at Rs. 10 per unit.
The fund will employ an active investment strategy, adjusting its defensive or aggressive postures depending on the available opportunities. An exit load of 0.25 per cent of the net asset value (NAV) will be applicable if units are redeemed or switched within 30 days from the date of allotment.
For lump sum purchase, the minimum subscription amount is Rs. 5,000 and in multiples of Rs. 1,000 thereafter. Investors can also start systematic investment plans (SIP) at a minimum amount of Rs 500.
What Is Arbitrage Fund?
Franklin India Arbitrage Fund will aim to capitalise on the implied cost of carry between the underlying cash and the derivatives market, thus offering potential returns for investors.
Further, holding the fund for over a year will allow investors to benefit from lower capital gains tax rates, thus making it a tax-efficient investment option.
Arbitrage funds simultaneously buy and sell securities in different markets to exploit price discrepancies. For instance, if a stock is priced at Rs. 100 in the cash market and Rs. 110 in the futures market, the stock would be bought in the cash market and sold in the futures market to lock in a profit of Rs. 10 per share.
The remaining part of the portfolio will be allocated to debt and money market instruments.
Avinash Satwalekar, president, Franklin Templeton–India, said, “Arbitrage funds in India are ideal for investors seeking short-term income generation without exposing their investments to high risk.”
Arbitrage funds are considered low-risk investments since they aim to profit from price inefficiencies rather than relying on market movements.
