INSUBCONTINENT EXCLUSIVE:
Tata Arbitrage Fund, one of the top performing scheme in the category, has suspended fresh flows from March 19
Arbitrage funds look to benefit from the price anamolies between shares and its futures contracts
But, in the wake of the sharp sell off in the stock market, arbitrage opportunities have dwindled.
In this strategy, these schemes buy a
share and simultaneously sell its futures in the event of differences in value
The bet is that their values would converge eventually
The strategy requires futures prices to trade above that of the share.
In a note to investors, Tata Mutual Fund said due to unprecedented
selling in the markets, futures are now quoting at a huge discount to share
positions are well managed, however fresh inflows will be deployed at negative spreads
Thus, to ensure that the existing investors do not get adversely affected by the deployment of fresh inflows, we have suspended fresh
Existing SIP and STP instalments will however continue to be processed, the fund said.
Tata Arbitrage Fund has returned 7.72% in the past
one year against the category average of 6.13%
Many HNI investors have been pouring money into arbitrage funds over the last one year as they do not carry any credit risk and enjoy