Features of Bajaj Finserv Arbitrage Fund

An arbitrage fund is a type of hybrid mutual fund that makes use of the price differential in the cash and derivatives market to generate returns. The key feature of an arbitrage fund is its ability to exploit arbitrage opportunities while minimising risk, as the fund typically invests in both equity and debt instruments. Hence, arbitrage fund managers are always on the lookout for pricing differences of the same security between different markets.

• Table of contents

1. Bajaj Finserv Arbitrage Fund features

Bajaj Finserv Arbitrage Fund Features

The Bajaj Finserv Arbitrage Fund, managed by Bajaj Finserv Asset Management Ltd., is designed to offer investors a blend of investment strategies that aim at capitalizing on arbitrage opportunities, thereby creating a potential for returns.

Arbitrage funds have a lower risk profile compared to pure equity investments. The arbitrage process involves simultaneous buying and selling of an asset to profit from the price difference in different markets.

Let’s take a closer look at the distinct features of the Bajaj Finserv Arbitrage Fund:

(Please refer the Scheme Information Document for detailed asset allocation)

This allocation strategy is designed to avoid double counting of exposure, and the allocation is rebalanced in line with market conditions.

• Market-neutral positioning: By investing in both the cash and derivatives segments, the Bajaj Finserv Arbitrage Fund maintains a market-neutral stance, attempting to profit from the differential pricing of securities in these diverse markets without taking on significant directional market risk.
• Dynamic asset allocation: The fund dynamically allocates assets between equity and equity-related instruments (including derivatives and stock options), and debt and money market instruments, thereby balancing the risk-reward ratio.
  • Equity and related instruments (including derivatives): 65% to 100%
  • Debt and Money Market instruments: 0% to 35%
  • Non-convertible preference shares: 0% to 10%
• Focus on relative stability and liquidity: With a portion of the fund's assets invested in debt and money market instruments, the investment goal emphasizes on relative stability and liquidity. This approach also helps to manage the fund's cash requirements effectively, seeking to provide a cushion against market volatility.
• Diversified arbitrage strategies: The Bajaj Finserv Arbitrage Fund employs a range of arbitrage strategies, such as cash-future arbitrage and dividend arbitrage, to exploit the pricing inefficiencies across markets. The diversification of strategies aims to enhance the potential for returns while also minimizing risk.
• Compliance and transparency: In line with SEBI guidelines, the fund does not engage in speculative practices like short selling in the cash market. The fund's operations are transparent, with clear disclosures about its investment strategies and asset allocation.
• Tailored for conservative investors: The Bajaj Finserv Arbitrage Fund can be suitable for conservative investors who seek to benefit from the equity markets without taking on the associated risks. It is carefully designed for those who prefer a cautious approach but are also keen on a strategy that goes beyond the traditional debt instruments.

This fund is also suited for investors looking for lower risk options with a potential for consistent returns and those who want to take advantage of market mispricing without significant exposure to the equity market.

Conclusion

The Bajaj Finserv Arbitrage Fund presents a suitable option for investors looking to explore the benefits of equity markets while mitigating risk through arbitrage opportunities. With its carefully planned asset allocation, diversified arbitrage strategies, and adherence to regulatory standards, the fund can be an ideal choice for conservative investors aiming for relatively stable returns.

Whether you are aiming to diversify your portfolio or seeking a low-volatility investment avenue, the Bajaj Finserv Arbitrage Fund can be a part of your investment strategy. Before making an investment, you may consider consulting with a financial advisor to ensure that the fund is suitably aligned with your financial goals and requirements.

FAQs:

What is an arbitrage fund?

An arbitrage fund is a type of mutual fund that aims to profit from the price difference of the same asset in different markets.

What is the investment objective of the Bajaj Finserv Arbitrage Fund?

The investment objective of the Scheme is to seek to generate returns by investing in arbitrage opportunities in the cash and derivatives segments of the equity markets and by investing balance in debt and money market instruments. However, there is no assurance that the investment objective of the Scheme will be achieved.

Which type of investor should consider the Bajaj Finserv Arbitrage Fund?

The fund is ideal for investors seeking to invest in low to moderate risk opportunities and those interested in market-neutral strategies.

What are the benefits of investing in an arbitrage fund?

Arbitrage funds offer the potential for low-risk returns and are less affected by market volatility compared to pure equity funds.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This document should not be treated as an endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purposes only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals, and horizon. This information is subject to change without any prior notice.