Arbitrage funds back in favour as market volatility boosts returns

Interest in low-risk equity products of mutual fund schemes see interest after extended period of outflows

Arbitrage funds have recorded net inflows for three months straight, after steep outflows for half a year before that. The trend changed as mutual fund (MF) schemes improved amid a rise in equity market volatility.

Investors redeemed over Rs 31,000 crore from arbitrage schemes between June and November before putting in Rs 3,000 crore in the last three months, shows data from the Association of Mutual Funds in India (Amfi).

Arbitrage funds are low-risk equity products with returns often comparable to liquid funds in the debt MF space. These schemes run fully-hedged equity positions and generate returns from the differential