ICICI Prudential Arbitrage Fund has topped the charts in the arbitrage mutual fund category, delivering over 2% returns in the last three months. As the largest fund by size, its recent performance is notable, yet investors should balance this against longer-term results where it has faced competition. The fund also recently declared an income distribution for its unit holders.
The ICICI Prudential Arbitrage Fund has emerged as the top performer in its category over the past three months, with returns ranging between 2.01% and 2.19%. As the largest fund in this space with approximately ₹33,423 crore in assets under management, its recent performance has drawn attention from investors looking for short-term stability.
Arbitrage funds function by capturing the price difference between the cash market, where shares are bought directly, and the derivatives market, where futures contracts are traded. This strategy is generally considered low-risk compared to pure equity funds, as the goal is to profit from price gaps rather than betting on whether stock prices will rise or fall.
Despite this recent success, investors should look at the broader picture. While the fund has delivered competitive short-term gains, it has sometimes trailed its benchmark index and other competitors over longer periods, such as one or three years. Peer funds, including the Invesco India Arbitrage Fund, have often shown stronger consistency over these extended timeframes, suggesting that short-term performance does not always guarantee long-term market leadership.
On the operational front, the fund recently declared an Income Distribution cum Capital Withdrawal (IDCW) payout for investors, with August 3, 2026, set as the record date. This means unit holders as of that date are eligible for the distribution.
Investors interested in this category should keep a few practical points in mind. First, there is an exit load of 0.25% if you withdraw money within 15 days of investing, which is a fee intended to discourage very short-term trading. Second, arbitrage funds are taxed similar to equity funds. This means gains from sales made within one year are treated as short-term capital gains, while gains from sales held longer than one year are subject to long-term capital gains tax rules.
Because returns in this category depend heavily on market volatility and the price spreads between cash and derivatives, performance can fluctuate significantly. Investors tracking this fund should look beyond three-month returns and assess the fund's track record over several years to ensure it aligns with their personal financial goals and risk appetite.