The Kotak Arbitrage Fund has recorded a 7.0% three-year compound annual growth rate, ranking as the top performer in its category. With an asset base exceeding Rs 72,000 crore, the fund remains the largest among its peers, though its returns have trailed behind its benchmark index.
The Kotak Arbitrage Fund has secured the top spot for three-year compound annual growth rate returns among arbitrage mutual funds, according to data as of July 2, 2026. This performance comes as the fund continues to maintain its position as a dominant player in the industry, managing a corpus of Rs 72,079.2 crore. For a fund to be considered in this analysis, it must hold at least Rs 1,500 crore in assets.
While the 7.0% three-year return places it slightly ahead of peers like the UTI Arbitrage Fund and Invesco India Arbitrage Fund, which recorded returns of 7.0% and 6.9% respectively, investors often look beyond raw returns to understand the full picture. A key factor for investors to track is the gap between the fund's actual performance and its benchmark index. Over the three-year period, the Kotak Arbitrage Fund lagged its benchmark by 0.5 percentage points, with the benchmark returning 7.6%. This trend also appeared in one-year data, where the fund trailed its benchmark by 1.2 percentage points, as the benchmark index delivered 7.2%.
Arbitrage funds are designed to generate returns by exploiting price differences between the cash and derivatives markets. Because these funds carry lower risk than equity-focused funds, they are often used by conservative investors to park excess cash. However, as leadership rankings often shift, investors may notice that performance varies significantly depending on the time frame chosen. For instance, while Kotak Arbitrage Fund holds the lead over three years and in the recent one-month window with 0.9% returns, other funds perform better over different durations. The HDFC Arbitrage Fund recently led the three-month performance charts with 1.5% returns, while the Invesco India Arbitrage Fund outperformed others over the one-year period with 6.1% returns.
These variations highlight that fund performance is rarely static. Investors looking at these schemes may want to focus on how consistently a fund manages to capture price spreads while keeping tracking errors low. As market conditions evolve, the ability of a fund manager to identify and execute arbitrage opportunities efficiently remains the primary monitorable for those seeking stable, debt-like returns from these products.