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New fund offering: Franklin India Arbitrage Fund is open for subscription

The minimum subscription amount is Rs 5,000 and in multiples of Rs 1,000 thereafter. Investors can also start systematic investment plans (SIP) at a minimum amount of Rs 500

Mutual Fund, AUM, Asset Under Management

Ayush Mishra New Delhi

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Franklin Templeton Mutual Fund launched an arbitrage fund on November 4 to capitalise on arbitrage opportunities in the cash and derivative segments of the equity market.
 
The scheme- Franklin India Arbitrage Fund- will close on November 18 and re-open for continuous sale and repurchase on November 21. The NFO is an arbitrage-focused, open-ended hybrid scheme.
 
The fund will employ an active investment strategy, adjusting its defensive or aggressive postures depending on available opportunities. It will aim to capitalise on the implied cost of carry between the underlying cash and derivatives market, offering potential returns for investors. Furthermore, holding arbitrage funds for over a year will allow investors to benefit from lower capital gains tax rates, making it a tax-efficient investment option, according to the press release.
 
  What are Arbitrage funds
  Arbitrage funds are mutual funds that seek to profit on price differentials in the derivatives and cash (or spot) markets by engaging in simultaneous buy and sell transactions in cash and futures markets.
 
“Arbitrage funds in India are ideal for investors seeking short-term income generation without exposing their investments to high risk,” said Avinash Satwalekar, president, Franklin Templeton–India.
  Details about Franklin India Arbitrage Fund
  Objective of scheme: The investment objective of the scheme is to generate capital appreciation and income by predominantly investing in arbitrage opportunities in the cash and derivative segments of the equity markets and the arbitrage opportunities available within the derivative segment and by investing the balance in debt and money market instruments. There is no assurance or guarantee that the investment objective of the scheme will be achieved.
 
Benchmark: The fund will be benchmarked against Nifty 50 Arbitrage Index.
  Investment strategy: The fund will allocate a minimum 65 per cent of its investments to equity and equity-related securities, with up to 35 per cent invested in debt and money market instruments, cash, and cash equivalents. The scheme aims to capitalise on arbitrage opportunities between spot and futures prices of exchange-traded equities, as well as within the derivatives segment. In cases where the Fund Manager deems arbitrage opportunities insufficient, the scheme may alternatively invest in short-term debt and money market securities.
  Minimum investment: The minimum investment amount for lumpsum investment is Rs 5,000 and for SIP is Rs 500.
 
Exit load: An exit load of 0.25 per cent will be applicable if units are redeemed/ switched out within 30 days from the date of allotment and the exit load will be nil thereafter.
 
Fund manager: The scheme will be managed by Rajasa K, Yogik Pitti, and Pallab Roy.
  Who should invest
  This scheme is ideal for investors looking for short-term income generation through a hybrid approach. It primarily focuses on generating returns by leveraging arbitrage and other derivative strategies within the cash and derivative segments of the equity market, while also capitalising on potential arbitrage opportunities within the derivatives segment. The remaining assets will be allocated to fixed-income and money market instruments.

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First Published: Nov 05 2024 | 12:09 PM IST

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