Mutual fund investment: BOI Axa arbitrage fund launched
An arbitrage fund follows the strategy of taking advantage of the price differential of the stock between the ‘Cash market’ and the ‘Futures Market’. The fund manager simultaneously buys shares in the cash market and sells it in futures or derivatives market.
BOI Axa Mutual Fund launched the BOI AXA Arbitrage Fund, an open-ended scheme that invests in arbitrage opportunities. The new fund offering (NFO) opens on May 31, and closes on June 14. The investment strategy of the fund is to generate income through arbitrage opportunities between cash and derivative segments of the equity market and arbitrage opportunities within the derivative segment and by deployment of surplus cash in debt securities and money market instruments, said a note issued by the company.
An arbitrage fund follows the strategy of taking advantage of the price differential of the stock between the ‘Cash market’ and the ‘Futures Market’. The fund manager simultaneously buys shares in the cash market and sells it in futures or derivatives market. The difference in the cost price and selling price is the return you earn. According to data from Valueresearch, the average return for arbitrage funds as a category has been more than 6% over a one to three year period.
The BOI AXA Arbitrage Fund is benchmarked against the Nifty 50 Arbitrage Index. The minimum investment in equity and equity related instruments is 65% of total assets. The minimum investment amount is Rs 5,000.
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According to the note, the fund is a moderately low risk fund, suitable for risk-averse investors looking for short-term deployment of surplus funds. It is suitable for those looking for investment opportunities that provide risk-return profile like liquid fund along with tax advantages of an equity fund. The fund offers growth, dividend pay out and dividend repayment options.
Source: DNA Money