{"id":108276,"date":"2026-06-15T13:25:29","date_gmt":"2026-06-15T07:55:29","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=108276"},"modified":"2026-06-15T13:25:29","modified_gmt":"2026-06-15T07:55:29","slug":"arbitrage-funds","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/arbitrage-funds\/","title":{"rendered":"Arbitrage Funds"},"content":{"rendered":"<h2><b>Arbitrage Funds Latest News<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Arbitrage (arb) funds are positioned to take advantage of the mispricing in futures contracts. <\/span><\/p>\n<h2><b>About Arbitrage Funds<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Arbitrage funds are <\/span><b>equity-oriented hybrid funds<\/b><span style=\"font-weight: 400;\"> that l<\/span><b>everage arbitrage opportunities in the market.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The basic principle behind arbitrage is to<\/span><b> take advantage of temporary price differences to generate profits<\/b><span style=\"font-weight: 400;\"> with<\/span><b> minimal risk.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">These can be a <\/span><b>pricing mismatch between two exchanges<\/b><span style=\"font-weight: 400;\">, <\/span><b>different pricing in the spot and futures market,<\/b><span style=\"font-weight: 400;\"> etc.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The fund manager of an arbitrage fund <\/span><b>buys and sells the shares at the same time<\/b><span style=\"font-weight: 400;\"> and <\/span><b>earns the difference <\/b><span style=\"font-weight: 400;\">between the<\/span><b> selling price and the buying price<\/b><span style=\"font-weight: 400;\"> of the share.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The underlying principle is to capture the price spread between the buying and selling, often within a<\/span><b> short time frame.\u00a0\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This is fundamentally<\/span><b> different from any other form of investing, where you purchase an asset and wait for it to grow in value<\/b><span style=\"font-weight: 400;\"> before selling it.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">In an <\/span><b>arbitrage fund<\/b><span style=\"font-weight: 400;\">, the fund manager <\/span><b>invests in equities only when<\/b><span style=\"font-weight: 400;\"> he finds a <\/span><b>definite opportunity to earn returns.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><b>If there are no arbitrage opportunities<\/b><span style=\"font-weight: 400;\"> available, then the<\/span><b> fund invests in short-term money market instruments and debt securities<\/b><span style=\"font-weight: 400;\"> to ensure stable returns.\u00a0<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The important thing to note here is that the <\/span><b>price difference is usually very small. <\/b><span style=\"font-weight: 400;\">Therefore, the fund manager has to make <\/span><b>several trades in one day to book a reasonable profit.\u00a0<\/b><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">They are <\/span><b>classified as hybrid mutual funds<\/b><span style=\"font-weight: 400;\"> where according to the <\/span><b><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/securities-and-exchange-board-of-india-sebi\/\" target=\"_blank\">Securities and Exchange Board of India (SEBI)<\/a>, at least 65% of the fund\u2019s assets must be in equities and equity-related securities.\u00a0<\/b><\/li>\n<\/ul>\n<h2><b>Arbitrage Funds <\/b><b>Benefits<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><b>Low Risk, Equity-Like Returns: <\/b><span style=\"font-weight: 400;\">Since the buying and selling are hedged, the risk is minimal, making it an attractive option for risk-averse investors.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Tax Advantages:<\/b> <b>Gains <\/b><span style=\"font-weight: 400;\">from arbitrage funds <\/span><b>held for more than one year qualify as long-term capital gains (LTCG).<\/b><\/li>\n<li style=\"text-align: justify;\"><b>Liquidity: <\/b><span style=\"font-weight: 400;\">Arbitrage funds offer high liquidity, allowing investors to <\/span><b>redeem <\/b><span style=\"font-weight: 400;\">their <\/span><b>money quickly <\/b><span style=\"font-weight: 400;\">when needed.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Diversified Portfolio: <\/b><span style=\"font-weight: 400;\">These funds diversify investments across various sectors and instruments, reducing the risk.<\/span><\/li>\n<\/ul>\n<h2><b>Arbitrage Funds <\/b><b>Limitations<\/b><\/h2>\n<ul>\n<li style=\"text-align: justify;\"><b>Market Dependency:<\/b><span style=\"font-weight: 400;\"> Returns are linked to market volatility; low volatility means fewer opportunities for arbitrage.<\/span><\/li>\n<li style=\"text-align: justify;\"><b>Short-Term Focus<\/b><span style=\"font-weight: 400;\">: They may <\/span><b>not be ideal for long-term wealth creation.<\/b><\/li>\n<\/ul>\n<p><b>News<\/b><strong>:<\/strong> <a href=\"https:\/\/epaper.thehindu.com\/ccidist-ws\/th\/th_delhi\/issues\/189438\/OPS\/GF4G46N1K.1+G73G47S1R.1.html\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\"><strong>TH<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Arbitrage Funds are equity-oriented hybrid funds that leverage arbitrage opportunities in the market. Read more about Arbitrage Funds, Meaning, Benefits, Limitations, Latest News.<\/p>\n","protected":false},"author":23,"featured_media":108297,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[8139],"class_list":{"0":"post-108276","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"tag-arbitrage-funds","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108276","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=108276"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108276\/revisions"}],"predecessor-version":[{"id":108313,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108276\/revisions\/108313"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/108297"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=108276"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=108276"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=108276"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}