Arbitrage category of funds continue to witness renewed interest from investors on account of market volatility. Investors use Arbitrage fund to park their short-term surplus aiming for capital appreciation with minimal risk, periodic income and tax advantage.
UTI Arbitrage Fund is one among the early generation of arbitrage funds which was launched in 2006 and now has a 14-year track record spanning across different market cycles. The fund being equity oriented enjoys certain tax arbitrage (in respect of capital gains tax) compared to other debt investment avenues. It has a reasonable track record of monthly dividend distribution. The periodic income in the form of dividend can help investors plan out their finances in a holistic manner. The NAV appreciation in addition to this adds to overall return. Arbitrage funds can provide a relatively safer investment avenue for short term parking of funds.
The fully hedged equity portfolio takes the worry off for the investor and targets higher yield from arbitrage opportunities. On debt side, the fund manager focuses on quality debt instruments (such as AAA, A1+) with average maturity of 175 days.