Arbitrage fund vs Debt

POSTED BY Karthik ON July 25, 2013 8:55 pm COMMENTS (5)

With the recent negative trend in Debt (Short term debt / Dynamic bond) fund, I am seriously looking at ICICI Equity arbitrage fund (Thanks to Mr.Pattu), As it has the advantage of risk free and Tax free.

http://freefincal.com/category/mutual-funds/arbitrage-mutual-fund/

http://www.moneycontrol.com/mutual-funds/performance-tracker/returns/arbitrage-and-arbitrage-plus.html

5 replies on this article “Arbitrage fund vs Debt”

  1. Karthik says:

    The ICICI Equity Arbitrage fund is called as a Hybrid Equity arbitrage. only 70% goes to equity. The best past is its tax free nature (and being risk free). Returns are bonus.

  2. sunil says:

    Dear Karthik,

    In Arbitrage itself, we have 2 categories, Pure Arbitrage and Arbitrage PLus.
    Pure Arbitrage Funds trade with 100% Hedging and Arbitrage Plus comes with more risk then the Pure one’s

    However extensive i have searched, i am not able to find all the funds which are Pure arbitrage and which are Arbitrage Plus.

    But for my purpose, i have invested in UTI Spread, which is a pure Arbitrage Fund.

    @ Pattu : Thanks for pointing this through your blog.

    1. Sunil, I should thank you for bring this point to my notice.

  3. Debt funds will still outperform FDs over a long enough period of time.

    You can use this calculator to check

    http://freefincal.com/investment-calculators/fd-vs-debt-fund-returns-comparator/

    one will get higher post-tax corpus even with lower debt fund return wrt FD return
    due to the fascination nature of compounding coupled with taxation.

    So stay invested in debt funds.

  4. Dear karthik,

    An arbitrage fund is similar to a liquid fund wrt returns and like a equity fund wrt tax. It is USUALLY risk-free.
    However if there is a crash like 2008, this may give -ve returns. (although most funds did not in india).

    So for not so crucial short term goals you can use a arbitrage fund.

    NOTE: This fund is NOT for those who want returns.

    Thanks for sharing my post.

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