Arbitrage Fund And Launch of Mahindra Manulife Mutual Fund [NFO Closes on 19th August]

August 14, 2020 0 Comments

Looking to invest? In these uncertain times, when markets are extremely volatile, alternative assets such as Gold is at all-time high and investment in any other asset class is fraught with risk (don’t even want to talk about Fixed Deposits at prevailing rates), an Arbitrage Fund comes as a knight in the shining armor. Particularly promising, when a brand like Mahindra is associated with the same and is managed by seasoned professionals like Mr. Ashutosh Bishnoi.

Without any further build-up, presenting you a new fund from Mahindra Manulife Mutual Fund which will tick on all the boxes - ‘Mahindra Manulife Arbitrage Yojana,’ - an open-ended scheme investing in arbitrage opportunities. 

Key information

What is an Arbitrage fund
Simply put, it is a type of mutual fund that leverages the price differential in the cash and derivatives market to generate returns. The returns from this Mutual Fund depends on the volatility of the underlying asset (perfect yay!!)

What should I look for

· Better tax efficiency on returns compared to short term debt funds

· Relatively lower risk as arbitrage strategy focuses on protecting downside risk by capturing market
· One of the least volatile hybrid schemes suitable for investment across market cycles

Investment Strategy

Scheme to invest in arbitrage positions between cash & futures trading on exchanges, invest in a basket of stocks and short the corresponding futures against it, or derive higher returns from the implied cost of carrying between the underlying and the derivatives market.

Underlying instruments

  1. Normal circumstances: Around 65-100% in equity and equity-related instruments including equity derivatives, ~35% in debt and money market securities including tri-party repo, reverse repo.
  2. Defensive circumstances: Around 0-65% in equity and equity-related instruments including equity derivatives and 35 - 100% in debt and money market securities including tri-party repo, reverse repo, and up to 10% in units issued by REITs & InvITs.

Past performance of Arbitrage Funds: Average 6-7% annualized return over the last 6 months to 2 years (Nifty 50 Arbitrage Index)

When can I invest: New Fund Offer opens on August 12, 2020, and closes on August 19, 2020, and it will reopen for continuous sale and repurchase from August 25, 2020.

Minimum Investment: Rs. 1,000/- and in multiples of Re. 1/- thereafter

Who is launching the NFO
Mahindra Manulife Investment Management Private Limited (Formerly known as Mahindra Asset Management Company Pvt. Ltd.), a (51:49) joint venture of Mahindra & Mahindra Financial Services Limited (MMFSL) and Manulife Investment Management (Singapore) Pte. Ltd.

Exit Load
An exit load of 0.25% is payable if Units are redeemed/switched out on or before completion of 30 days from the date of allotment of Units; - Nil - If Units are redeemed / switched-out after completion of 30 days from the date of allotment of Units. Redemption /Switch-Out of Units would be done on First in First out Basis (FIFO).

About Mahindra & Mahindra Financial Services Limited: It is part of the Mahindra Group, is one of India’s leading non-banking finance companies. Focused on the rural and semi-urban sector, the Company has over 6.9 million customers and has an AUM of over USD 10 Billion. The Company is a leading vehicle and tractor financier provides loans to SMEs and also offers fixed deposits. The Company has over 1,300 MMFSL offices and reaches out to customers spread over 3,70,000 villages and 7,000 towns across the country.

Fund Managers:

(a) Srinivasan Ramamurthy [Fund Manager – Equity]
(b) Rahul Pai [Head – Fixed Income]

NFO closes on August 19. For more info:

Happy Investing!

Disclaimer: The details are as per public sources, investors are requested to take their own caution while investing.
Picture Source: Corporate website
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