Arbitrage funds: Capitalizing on Market Inefficiencies

Purpose: Our goal is to generate profits for our clients by taking advantage of temporary imbalances through Arbitrage funds.

Objective: To achieve the best Arbitrage fund strategies by taking advantage of mispricing that may arise due to market inefficiencies, liquidity imbalances, or other temporary factors.

Main features of Arbitrage Mutual Funds:

Price Discrepancy Exploitation: At the core of an arbitrage fund's strategy is the identification and exploitation of price discrepancies. These funds actively seek out situations where an asset is trading at different prices in different markets or forms.

Market-Neutral Approach: Arbitrage funds often adopt a market-neutral stance, meaning they aim to generate returns irrespective of broader market movements. This is achieved by balancing long and short positions, thus reducing exposure to market volatility.

Steady Returns: Money Marché tries to gain steady and predictable returns for investors through arbitrage funds. These funds aim to generate income through price differentials, often tied to prevailing interest rates or market conditions.

Liquidity Management: Liquidity risk is a consideration for arbitrage funds, as some strategies require access to liquid markets to execute trades effectively.

Arbitrage fund Exit Load Consideration: We make investors aware of the exit load associated with arbitrage funds. Exit load refers to the fee imposed on investors who redeem their investment before a specified period.

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Explore further to know more about Arbitrage funds and how Money Marché can help you gain steady returns while minimizing risks.

About Money Marché Arbitrage funds:

Money Marché Arbitrage funds aim to minimize risk exposure by focusing on short-term imbalances. We provide a steady income stream for investors seeking a reliable alternative to more volatile investment avenues.

What is Arbitrage Fund?

Arbitrage funds provide investors with an alternative way to navigate the complex world of finance. It takes the arbitrage concept and transforms it into an investment product accessible to a wide range of investors.

Arbitrageurs buy the asset at a lower price in one market and simultaneously sell it at a higher price in another, pocketing the difference as profit. Arbitrage funds aim to invest 65% of their funds in equity and 35% in debts, hence it is an equity-oriented fund.

A Background and History:

The year 2020 witnessed a flurry of market activity, and within this dynamic landscape, certain arbitrage funds stood out. Money Marché Arbitrage funds managed to navigate the challenges posed by the pandemic-induced market volatility, showcasing their ability to deliver steady returns despite the uncertain climate.

Examining the best arbitrage funds of 2020 provides valuable insights into their adaptability and potential for success.

The Personnel and their Skills:

Arbitrage funds are managed by experienced professionals who specialize in identifying and executing arbitrage opportunities. Our fund managers closely monitor markets, trends, and pricing disparities, making timely buy and sell decisions to maximize returns.

Fundamental value and philosophy:

Our primary goal in dealing with an arbitrage fund is to provide comprehensive guidance that empowers clients to make well-informed decisions, ensuring that the investment aligns with their unique financial aspirations and risk tolerance.

Investment approach

Our investment strategy for arbitrage funds is designed to minimize risk by focusing on short-term opportunities. This emphasis on exploiting temporary imbalances, rather than predicting long-term market trends, can make arbitrage funds a more stable investment choice for risk-averse investors.

Arbitrage funds taxation: How Arbitrage funds are taxed?

A significant aspect that warrants attention when investing in arbitrage funds is their taxation. The gains generated from these funds are categorized as short-term capital gains (invested for less than 1 year) and are taxed at 15% currently.

However, if you are looking for investing in these funds for more than 1 year then they will become long-term capital gains and will be taxed at 10%.

Core Values and Principles:

Money Marché’s fundamental objective in dealing with an arbitrage fund is to provide clients with personalized guidance and recommendations that align with their financial objectives, risk tolerance, and investment preferences.

Risk Management Plans:

Arbitrage funds aim for consistent returns, often tied to prevailing interest rates or the overall market environment. This predictability can appeal to risk-averse investors.

Long-term ambitions and desired results:

Our long-term ambition is to build strong relationships with our clients and help them achieve their financial goals.

Types of Arbitrage Strategies:

Cash-Futures Arbitrage: This involves buying an asset in the spot (cash) market and selling its corresponding futures contract.

Merger Arbitrage: This involves exploiting the price gap between a target company's stock and the offer price during a merger or acquisition.

Statistical Arbitrage: Utilizes quantitative models and statistical analysis to identify patterns and relationships between various securities.

Convertible Arbitrage: This involves exploiting price discrepancies between a company's convertible bonds and its common stock.

Options Arbitrage: This strategy involves exploiting pricing discrepancies between options and their underlying assets. The fund can create positions that aim to profit from differences in options pricing and market movements.

Equity-oriented arbitrage fund

These funds center their attention on exploiting price discrepancies between cash and derivative markets. The strategy often involves buying equities in the cash market and simultaneously selling equity futures contracts.

Benefits of Arbitrage funds with Money Marché:

Lower Risk: By design, arbitrage strategies seek to exploit temporary market inefficiencies. This focus on short-term imbalances reduces exposure to prolonged market fluctuations.

Diverse Arbitrage Strategies: Arbitrage funds employ a variety of strategies, including cash-futures arbitrage, merger arbitrage, statistical arbitrage, and options arbitrage, among others.

Tax Efficiency: Arbitrage fund returns are often treated as short-term capital gains, which can have tax implications depending on an individual's tax bracket. However, the relatively lower holding period of these funds can lead to potentially lower tax liability compared to traditional equity investments.

Portfolio Diversification: Arbitrage funds can serve as a diversification tool within an investor's portfolio. Their unique risk profile and low correlation with other assets can help reduce overall portfolio risk and enhance its overall stability.

Why choose Money Marché?

Awareness: Our job is to educate our clients about what arbitrage funds are and how they work. And explain the concept of exploiting price discrepancies, the different strategies employed, and the potential benefits and risks associated with these funds.

Assessing Client Goals and Risk Tolerance: We take the time to understand our client's financial goals, whether it's wealth preservation, steady income, or capital appreciation. And also assess the client's risk tolerance, as arbitrage funds, while generally lower in risk, are not entirely risk-free.

Exploring Suitability: Not every investment is suitable for every investor. A financial advisor evaluates whether an arbitrage fund aligns with the client's overall investment portfolio and strategy.

Performance Expectations: Arbitrage funds offer more stable and predictable returns compared to some other investments, but they also have limitations in terms of potential gains. So we set realistic performance expectations, ensuring that clients understand that the goal is steady returns rather than aggressive growth.

Contact Us

HS-1, Unit 5B, Kailash Colony, New Delhi 48
+91-8506088996
investments@moneymarche.com

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FAQ

You can learn more from our asked questions

What is an arbitrage fund?

An arbitrage fund is a type of mutual fund that aims to generate profits by exploiting short-term price discrepancies in the prices of the same asset across different markets or platforms.

How do arbitrage funds work?

Arbitrage funds employ strategies to simultaneously buy and sell the same asset at different prices in different markets, aiming to capture the price difference as profit. These funds often focus on strategies like cash-futures arbitrage, merger arbitrage, and statistical arbitrage.

Are arbitrage funds risk-free?

While arbitrage funds are generally considered lower in risk compared to some other investment options, they are not entirely risk-free. There are still risks associated with market volatility, execution errors, liquidity challenges, and changes in regulatory or tax policies.

What is the expected return from arbitrage funds?

Arbitrage funds typically aim for steady and predictable returns, often tied to prevailing interest rates or market conditions. The returns are usually modest compared to more aggressive investment strategies, but they offer stability.

Can I invest in arbitrage funds for the long term?

Arbitrage funds are generally designed for shorter investment horizons due to their focus on exploiting short-term price differences. They might not be suitable for long-term wealth accumulation goals.

Are arbitrage funds suitable for risk-averse investors?

Yes, arbitrage funds can be suitable for risk-averse investors due to their focus on stability and lower exposure to market volatility. However, investors should still understand the risks involved.