Zerodha Fund House has launched the Zerodha Arbitrage Fund, an open-ended scheme that seeks to capture arbitrage opportunities between stocks and their corresponding derivative contracts, the fund house said in a press release.
The fund will invest at least 65% in equity and equity derivatives, with the balance in debt instruments. The strategy aims to benefit from temporary pricing differences rather than depending on the market direction.
“Rather than depending on markets rising or falling, the strategy seeks to capture temporary price differences between a stock and its corresponding derivative contract. When these pricing gaps aren’t available, the fund temporarily parks the money in short-term debt instruments in accordance with the investment strategy,” the press release mentioned.
With a minimum investment of Rs. 5,000, the fund may appeal to conservative investors looking to park surplus cash for a few months. Moreover, the fund house said investors in higher tax brackets may consider arbitrage funds for their relatively low-risk profile and equity-fund taxation.
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