Bajaj Finserv Mutual Fund launches Bajaj Finserv Arbitrage Fund. Should you invest?

Bajaj Finserv Mutual Fund has launched Bajaj Finserv Arbitrage Fund, an open ended scheme investing in arbitrage opportunities.

The new fund offer or NFO of the scheme is open for subscription and will close on September 13. The scheme will reopen for sale and repurchase within five business days of allotment date.

The investment objective of the scheme is to generate returns by investing in arbitrage opportunities in the cash and derivatives segments of the equity markets and by investing balance in debt and money market instruments.

The performance of the scheme will be benchmarked against Nifty 50 Arbitrage Index (TRI).

The scheme will be managed by Nimesh Chandan (equity investments), and Siddharth Chaudhary (debt investments).

The minimum application amount for lumpsum investment will be Rs 500 and in multiples of Re 1. The minimum instalment amount for SIP will be from Rs 500 upto Rs 1,000 with minimum 60 instalments, and above Rs 1,000 with minimum 6 instalments. The scheme will offer regular and direct plans with growth and IDCW options.

The scheme will invest 65-100% in equity and equity related instruments including derivatives and stock options, 0-35% in debt and money market instruments including the margin money deployed in derivative transactions, and 0-10% in non-convertible preference shares.

The investment strategy of the scheme will be that the fund manager will identify and take advantage of market neutral arbitrage opportunities by executing deals simultaneously in both markets. In compliance with SEBI guidelines, the scheme will not engage in short selling in the cash market at any time.

The scheme is suitable for investors who are seeking short-term income generation, and who want income through arbitrage opportunities in the cash and derivatives segments of the equity markets. The principal invested in this scheme will be at low risk, according to the scheme information document.

Should you invest? ETMutualFunds always ask investors to invest in an NFO only if it offers something unique - that is, some investment option that is not available in the market or adding something to the existing available option.

There are 26 schemes already available in the arbitrage category. Around 19 schemes have a performance record of around five years. Arbitrage funds are typically recommended to investors to park money for better post-tax returns. These schemes are treated like equity schemes and investments will qualify for LTCG tax of 10% if held over a year. Most arbitrage funds offered around 7% in the last year.

If you are looking for recommendations, see : Best arbitrage mutual funds to invest in 2023