The domestic mutual fund industry continued to see inflows and assets under management (AUM) as on October stood at R16.28 lakh crore. However, in the last few months arbitrage funds as a category has generated a lot of interest from investors, say market participants.
Senior officials in the mutual fund industry say that total AUM of arbitrage funds as on October stood at over R36,500 crore. “In the current financial year, we have seen inflows of around R6,000-8,000 crore only in the arbitrage funds. If we look at the inflows into equity funds most of the money is primarily coming from systematic investment plans (SIPs) and arbitrage funds,” said a CEO of a mid-size fund house.
Arbitrage funds have the risk profile of a debt fund but are taxed as equity funds which makes them attractive for short term investors. Typically this funds work well in volatile markets, as fund managers take advantage on the price differential between the cash and futures markets.
Manoj Nagpal, CEO of Outlook Asia Capital said, “In the last two-three months returns of liquid funds have come down and this has helped arbitrage funds. The tax advantage is one of the biggest factors why investors are attracted to this product.”
According to the latest data from the Association of Mutual Funds in India, net inflows into mutual fund in the month of October stood at R32,334 crore with most coming from income funds at R52,125 crore. Equity funds continued to see net inflows of R8,688 crore in October.