hybrid Fund

Arbitrage Funds

Market-neutral strategy capturing price differences between cash and futures markets.

Avg. Return (5Y)

7.15%

No. of Funds

Risk Level

Low

Ideal Horizon

3+ months

Top Arbitrage Funds Sorted by Returns

Scheme

Kotak Equity Arbitrage Fund

Kotak MF

Expense: 0.43%

1Y: 7.3%

3Y: 6.5%

5Y: 6.1%

ICICI Prudential Equity Arbitrage Fund

ICICI Prudential MF

Expense: 0.38%

1Y: 7.1%

3Y: 6.3%

5Y: 5.9%

* Returns are annualized and based on historical data. Past performance does not guarantee future results. Min. SIP: ₹500.

What is a Arbitrage Fund?

Arbitrage funds exploit pricing differences between the cash (spot) and futures (derivatives) markets. They buy shares in the cash market and simultaneously sell the same in the futures market, locking in a small spread with minimal risk.

Key Advantages

Near risk-free returns from arbitrage spreads
Equity taxation benefit (65%+ in equity)
Better post-tax returns than liquid/ultra-short funds
Very low volatility

How It Works

The fund buys stocks in the cash market and simultaneously sells matching futures contracts. The price difference (spread) is the return. On expiry, positions are squared off, and new ones are created.