NFO Alert: Zerodha Fund House launches arbitrage fund

Zerodha Fund House today announced the launch of the Zerodha Arbitrage Fund, an open ended scheme investing in arbitrage opportunities, that may be ideal for investors looking to park surplus cash in a tax-efficient, relatively low-volatility manner.

The new fund offer or NFO of the fund is open for subscription and will close on August 14. The fund will reopen for continuous sale and repurchase within five business days from the date of allotment.

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Investors in higher tax brackets may consider this fund since it has relatively low-risk while with the lower taxation (LTCG, STCG) applicable to equity funds.

The fund invests in a mix of equity and equity derivatives (min. 65%) and debt instruments. Rather than depending on markets rising or falling, the strategy seeks to capture temporary price differences between a stock and its corresponding derivative contract. When these pricing gaps aren't available, the fund temporarily parks the money in short-term debt instruments in accordance with the investment strategy.

With a minimum investment of Rs 5,000, the fund may be suitable for conservative investors looking to park surplus money for a horizon of a few months.

The fund will be managed by Kedarnath Mirajkar and the performance will be benchmarked against Nifty 50 Arbitrage Index TRI. The fund will seek to generate income by identifying and investing in arbitrage opportunities arising from price differentials between the cash and derivatives segments of the equity market, including opportunities across different derivative contracts and expiry periods of the same stock.

This arbitrage fund will allocate 65-100% in equity and equity related instruments including derivatives and 0-35% in debt and money market instruments, cash & cash equivalents, including units of mutual funds.

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The fund is suitable for investors who are seeking short term parking of funds and a low volatility investment strategy based on arbitrage opportunities in equity markets along with exposure to debt and money market instruments.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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