Kotak Arbitrage Fund has secured the top three-year performance spot in its category with a 7% CAGR, managing a significant corpus of over ₹72,000 crore. While the fund leads in assets, investors should note its performance compared to the benchmark index over different timeframes.
Kotak Arbitrage Fund has outperformed several peers in the arbitrage mutual fund category, recording a compound annual growth rate (CAGR) of 7% over the past three years, according to data from ACE MF as of July 7, 2026. This performance places it ahead of other major funds such as UTI Arbitrage Fund and Invesco India Arbitrage Fund, which recorded returns of 7% and 6.9% respectively during the same period.
Scale and Market Presence
Beyond return performance, Kotak Arbitrage Fund maintains the largest asset base in its category. As of the latest data, the fund manages a corpus of ₹72,079.2 crore. This high volume of assets under management (AUM) is a key feature, as the comparison focused on funds with at least ₹1,500 crore in assets. A large fund size can influence how efficiently a fund manager executes arbitrage strategies, which rely on finding price differences between the cash and derivatives market.
Tracking Benchmark Performance
While the fund has delivered competitive returns, it is important for investors to consider its performance relative to its benchmark. Over the three-year period, the fund’s returns trailed its benchmark by 0.6 percentage points, with the benchmark returning 7.6%. This trend is also visible in shorter periods; the fund lagged the benchmark by 1.2 percentage points over the one-year timeframe, where the benchmark returned 7.3%. Differences between fund returns and benchmark returns are common in actively managed funds and can be influenced by internal costs and the specific strategies used by the fund manager to deploy the large asset base.
Variable Returns Across Timeframes
Leadership rankings in the arbitrage category can shift frequently depending on the period being measured. For example, while Kotak Arbitrage Fund leads over a three-year horizon, other funds such as HDFC Arbitrage Fund have shown higher returns over shorter one-month and three-month periods. Similarly, Invesco India Arbitrage Fund outperformed in the one-year category with a 6.1% return. This variability highlights that arbitrage funds are primarily designed to provide low-risk exposure by using price gaps in the market, rather than seeking aggressive growth. Investors tracking these funds may focus on how consistently a fund manages to capture these price differences regardless of the broader market volatility. The primary factor for future performance will remain the availability of arbitrage opportunities and the overall liquidity in the Indian cash and derivatives segments.