Old Bridge Mutual Fund Launches New Arbitrage Fund

Old Bridge Mutual Fund has officially announced the launch of its latest open-ended mutual fund scheme, named the Old Bridge Arbitrage Fund. This new fund is designed to generate income primarily by identifying and capitalizing on price discrepancies between the equity market's cash segment and its derivatives segment, a strategy known as arbitrage. A portion of the fund's assets will also be allocated to debt and money market instruments for stability.

The New Fund Offer (NFO) period for the Old Bridge Arbitrage Fund will commence on November 6 and conclude on November 10, 2023. Following this NFO period, the scheme will reopen for continuous purchase and repurchase of units starting November 14.

The fund will employ a fully hedged, risk-conscious investment strategy, aiming to deliver relatively stable returns. Its asset allocation framework permits investments of 65% to 100% in equity and equity-related instruments, 0% to 35% in debt and money market instruments, and up to 10% in units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

The minimum investment required is ₹5,000. An exit load of 0.25% will be applicable for redemptions made within seven days of investment. This fund is positioned as an attractive option for investors seeking to deploy short- to medium-term surplus funds, providing liquidity and the tax advantages associated with equity-oriented products.

Ruchi Pandey, Chief Executive Officer of Old Bridge Mutual Fund, stated that the launch aligns with the firm's commitment to consistency and a disciplined investment approach, offering a market-neutral solution with low-risk return potential and tax efficiency.

Impact: This launch is significant for the Indian mutual fund industry as it adds another option in the arbitrage fund category. It could attract investors looking for tax-efficient ways to generate returns from market inefficiencies. The fund house's strategy might attract retail and high-net-worth investors seeking stable, low-volatility products. Expected impact on market returns for investors in this category: 7/10.

Difficult Terms: Arbitrage: A trading strategy that seeks to profit from price differences of the same or similar asset in different markets or forms. Open-ended scheme: A mutual fund that does not have a fixed maturity date and continuously issues and redeems units. Cash segment: The spot market where securities are traded for immediate delivery. Derivatives segment: A market where financial contracts (like futures and options) derived from underlying assets are traded. New Fund Offer (NFO): The period during which a new mutual fund scheme is open for subscription before it begins normal trading. Fully hedged: An investment strategy designed to minimize or eliminate risk by taking offsetting positions. Risk-conscious strategy: An investment approach that prioritizes capital preservation and limits potential losses. Asset allocation: The process of dividing an investment portfolio among different asset categories. REITs (Real Estate Investment Trusts): Companies that own, operate, or finance income-generating real estate. InvITs (Infrastructure Investment Trusts): Trusts that own income-generating infrastructure assets. Exit load: A fee charged when an investor redeems mutual fund units before a specified period. Liquidity: The ease with which an asset can be converted into cash without significantly affecting its price. Equity taxation: Tax rules applicable to gains and income from equity investments, often offering preferential rates.