The HSBC Arbitrage Fund recorded a 3.0% return over the last six months, outpacing several large-cap peers in the category. While short-term performance highlights individual fund gains, leadership frequently shifts across different time horizons, with Kotak and Edelweiss Arbitrage funds leading in other periods. Investors should note that arbitrage funds rely on market volatility and price gaps, making returns variable over time.
The HSBC Arbitrage Fund has emerged as a top performer among its peers based on six-month returns, delivering a 3.0% gain as of July 29, 2026. This analysis considers mutual fund schemes with a minimum asset base of Rs 1,500 crore, providing a comparable group of established funds. This 3.0% performance places the HSBC scheme in the top tier alongside other prominent players like the Kotak Arbitrage Fund and ICICI Prudential Arbitrage Fund, which also recorded similar returns for the same half-year period.
Arbitrage funds work by buying and selling the same security in different markets to capture small price differences. Because their returns are primarily driven by these price gaps and the interest earned on cash margins, their performance tends to be relatively stable but can fluctuate based on market volatility and trading opportunities. While the HSBC Arbitrage Fund has shown strong performance in the six-month window, data indicates that the lead in this category is highly dynamic.
Leadership varies significantly when looking at different timeframes. For instance, the Kotak Arbitrage Fund leads the pack for one-month returns with a 0.6% gain, while the Edelweiss Arbitrage Fund has outperformed in the three-month period, delivering 1.5%. Looking at a longer three-year horizon, the Kotak Arbitrage Fund holds the top position with a 7.0% return. These shifts demonstrate that investors should not rely on performance from a single window alone. A fund that performs well in the short term may face different market conditions over a longer duration.
When evaluating these funds, investors should also consider the broader role of arbitrage funds in a portfolio. These schemes are often used as low-risk alternatives to liquid funds, particularly for investors in higher tax brackets, as they are taxed as equity funds. However, returns are not guaranteed and depend on the effectiveness of the fund manager in capturing price spreads across stock and derivative markets. Investors might track future updates on fund performance, keeping in mind that these returns are subject to changes in market volatility, interest rates, and the overall volume of trading opportunities available to the fund managers.