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Best Arbitrage Funds to Invest in 2024

Arbitrage funds are hybrid mutual funds that generate returns by using the strategy of simultaneously buying and selling securities in different markets to take advantage of different prices.

What are the Arbitrage Mutual Funds?

Arbitrage mutual funds are a type of hybrid investment that aims to capitalize on short-term price discrepancies between different markets. They achieve this by simultaneously buying and selling the same security in two different markets, pocketing the price difference.

For example, an arbitrage fund might buy a stock on the cash market and sell a futures contract for the same stock at the same time. If the price of the stock is slightly higher in the futures market, the fund will profit from the difference when the futures contract expires.

These funds are generally considered low-risk investments compared to other equity options, as they aim to exploit minor price inefficiencies rather than relying on market movements for growth. 

Advantages of Arbitrage Mutual Funds

  • Lower risk: Exploit price discrepancies, minimizing market fluctuation impact.
  • Tax advantage: Lower long-term capital gains tax compared to other debt funds.
  • Steady income: Potential for consistent, modest returns from exploiting inefficiencies.

Following is the table of the five best Arbitrage Mutual Funds:

Scheme Name AUM (Crore) Expense Ratio (%) Returns as on – 26-02-2024 in % 3 Year Returns 5 Year Returns
2024 2023 2022 2021 2020
Edelweiss Arbitrage  8134.56 1.05 1.46 7.14 4.37 3.83 4.49 Average 5.82% Average 6%
Kotak Equity Arbitrage  35997.88 1.01 1.44 7.38 4.53 3.96 4.33
Mirae Asset Arbitrage  1023.92 0.9 1.42 7.04 4.1 3.49
Nippon India Arbitrage  13073.21 1.08 1.38 7.01 4.16 3.84 4.31
JM Arbitrage  102.71 1.05 1.38 6.64 3.96 2.75 2.56


Edelweiss Arbitrage Fund

holds 162 stocks, with a higher allocation to large-cap investments at 35.42%, followed by mid-cap at 22.97%, and small-cap at 7.75%. It also has a significant debt holding of 29, with a modified duration of 0.37 years and a yield to maturity of 7.40%. Other investments make up 9.41% of the portfolio.

Kotak Equity Arbitrage Fund 

has 168 stocks, with a larger emphasis on large-cap investments at 40.95%, followed by mid-cap at 19.38%, and small-cap at 4.61%. It holds 3 debt investments, with a modified duration of 0.10 years and a yield to maturity of 7.65%. Other investments constitute 12.05% of the portfolio.

Mirae Asset Arbitrage Fund 

holds 108 stocks, with a notable allocation to large-cap investments at 40.02%, followed by mid-cap at 19.98%, and small-cap at 11.03%. It holds 21 debt investments, with a modified duration of 0.19 years and a yield to maturity of 7.11%. Other investments account for 5.97% of the portfolio.

Nippon India Arbitrage Fund

 holds 153 stocks, with a significant allocation to large-cap investments at 41.85%, followed by mid-cap at 18.83%, and small-cap at 4.86%. It holds 15 debt investments, with a modified duration of 1.64 years. Other investments constitute 8.19% of the portfolio.

JM Arbitrage Fund 

has a higher allocation to equity at 70.96%, with 38.64% in giant, 31.84% in large, 24.84% in mid, and 4.68% in small. It also has a 22.3% allocation to debt and 6.74% in cash and cash equivalents.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.
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