Groww Mutual Fund Launches Arbitrage Fund for Hedged Equity Returns

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AuthorAnanya Iyer|Published at:
Groww Mutual Fund Launches Arbitrage Fund for Hedged Equity Returns
Overview

Groww Mutual Fund has launched a new Arbitrage Fund, available from April 8 to April 22. The open-ended fund uses a 'long cash – short futures' strategy to profit from price differences in cash and derivatives markets, aiming for hedged equity exposure. With over 65% equity allocation for potential tax benefits, investors should note fluctuating arbitrage chances and market risks. It's suited for those with at least a one-year horizon seeking less volatile equity exposure.

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How the Arbitrage Strategy Works

The Groww Arbitrage Fund employs a "long cash – short futures" strategy. This means buying an asset in the cash market and selling its futures contract at the same time. The goal is to capture profits from small, temporary price gaps between the two. This approach aims to be less affected by general market ups and downs, focusing instead on these pricing differences.

Tax Benefits and Key Risks to Consider

By keeping over 65% of its assets in equity and related instruments, the fund aims to be treated as an equity-oriented fund for tax purposes, potentially offering benefits over fixed-income options. However, arbitrage opportunities can vary and may decrease, potentially resulting in lower returns than anticipated. The fund does not guarantee profits. Investors should be aware of market, liquidity, and operational risks. It may also hold debt and money market instruments for managing liquidity.

Fund Details and Management Team

The fund will benchmark against the Nifty 50 Arbitrage TRI. Subscriptions start at Rs. 500, with no exit load. The fund management team includes Paras Matalia, Shashi Kumar, and Wilfred Gonsalves.

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Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.