Mahindra manulife arbitrage fund nfo review

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Mahindra Manulife Arbitrage Yojana Fund NFO – Should
you invest?
August 11, 2020  Suresh KP
Mahindra Manulife Arbitrage Yojana Fund NFO Review
Mahindra Manulife MF has come up with an arbitrage fund that would open for subscription
from August 12, 2020. Arbitrage Funds aim to provide income over the short term by
investing predominantly in arbitrage opportunities in the cash and derivative segments.
Home > Mutual Funds > Mahindra Manulife Arbitrage Yojana Fund NFO – Should you invest?
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While there are liquid funds and overnight funds to park surplus funds and also invest for
short term, some of the experts believe that, investing in arbitrage funds is better than those
funds. What are the issue details of the Mahindra Manulife Arbitrage Fund? Should you
invest in the Mahindra Manulife Arbitrage Fund or avoid?
Also Read: Top Pharma Mutual Funds to invest now
Issue details of Mahindra Manulife Arbitrage Yojana Fund (NFO)
This is an open-ended mutual fund equity scheme.
This scheme would open for subscription on August 12, 2020.
This scheme would close for subscription on August 19, 2020.
Since this is an open ended scheme, it would again open for subscription after 5 business
days from the date of allotment of Mf units after the NFO period.
This scheme is available in both regular and direct plans.
This plan offers both growth option and dividend option.
This scheme is available for lump sum and SIP investment.
Minimum investment is Rs 1,000 and in multiples of Rs 1 there-off for lump sum
investments.
Minimum investment is Rs 500 per month for monthly SIP and for a tenure of 6 months.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is no entry load to invest in this mutual fund scheme.
There is an exit load of 0.25% if the mutual fund units are redeemed within 30 days from the
date of allotment.
This scheme is classified as MODERATELY LOW risk scheme.

3. Scheme total expense ratio (TER) is estimated at a maximum of 2.25%, however it would
reduce based on the increase in the AUM.
Download Mahindra Manulife Arbitrage Fund SID
How do Arbitrage Mutual Funds work?
Here are a couple of examples which would help to understand this better.
1) Stock price difference between the stock exchanges
Let’s say the Infosys share price is trading at Rs 1,000 per share on NSE and at Rs 1,010
per share on BSE. If the fund manager of an arbitrage fund spots this opportunity, then they
buy shares from NSE and simultaneously sells them on the NSE. This allows him to make a
profit of Rs 10 per share (minus transaction + carrying costs) without any risks.
2) Stock Price difference between the cash and futures markets
Let’s say that the same Infy share trades at Rs 1,000 in the cash market and Rs 1,005 in
the futures market. The fund manager of the arbitrage fund buys shares from the cash
market and creates a futures contract to sell the shares at Rs 1,005. At the end of the
contract expiry time, they sell the stocks in the futures market and books a profit of Rs. 5 per
share (minus transaction + carrying costs) without taking any risks.
The above are only a few examples and there are several other ways where arbitrage
opportunities can be found.
You can check below short video which help you know Arbitrage funds in simple terms.
Source: Edelweiss Mutual Funds.

4. What is the investment objective of Mahindra Manulife Arbitrage Fund NFO?
The investment objective of the Scheme is to generate income by predominantly investing
in arbitrage opportunities in the cash and derivatives segment of the equity market 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
realized.
Who can invest in this mutual fund scheme?
The following can invest in this scheme.

5. 1) Resident adult individuals, either singly or jointly.
2) Minors through Parents/Lawful Guardian.
3) Hindu Undivided Family (HUF) through its Karta.
4) Partnership Firms in the name of any one of the partners.
5) Proprietorship in the name of the sole proprietor.
6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals,
Clubs and Public Sector Undertakings registered in India if authorized and permitted to
invest under applicable laws and regulations.
7) Banks
8) Non resident Indians (NRIs).
Complete list of eligible participants who can invest can be checked in prospectus of this
new fund offer.
Who is the Fund Manager of Mahindra Manulife Arbitrage Fund NFO?
The Fund Managers are:
1) Mr. Srinivasan Ramamurthy (Equity) and
2) Mr. Rahul Pal (Debt).
What is the benchmark for this scheme?
The benchmark for this scheme is NIFTY 50 Arbitrage Index TRI.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:

6. 1) It invests 65% to 100% in equity and equity linked Instruments including equity
derivatives. The risk profile in this segment is medium to high.
2) It would invest 0% to 35% in debt securities and money market Instruments (including
Triparty repo and reverse repo). The risk profile in this segment is low to medium.
3) It would invest 0% to 10% in units issued by REITs and InvITs. The risk profile in this
segment is medium to high.
Why to invest in the Mahindra Manulife Arbitrage Fund?
Here are a few reasons to invest in such funds.
1) Arbitrage mutual funds are low volatility in returns.
2) There is no equity exposure risk as fund manager is buying in one market and selling in
another market and making profits.
3) Returns of Arbitrage funds are tax efficient. They are treated like in equity funds, i.e.
STCG at 15% and LTCG at 10% without indexation. Hence, these provide better post tax
returns.
You may also like: Nippon Multi Asset Mutual Fund invests in Equity+Debt+Gold –
Should you invest then?
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) Extreme conditions in Indian equity markets can cause temporary disruptions. A sharp
market correction, like it happened in March-2020 (due to the Covid-19 crisis) resulted in
stock futures trading at a discount rather than a premium to their spot price which has cut
the returns of arbitrage funds.
2) Since the spot and futures positions of arbitrage funds are market-to-market, there are
situations where NAV falls. One needs to hold for 3-6 months to get good returns from such

7. funds.
3) In case of a large redemption in such arbitrage funds, the scheme may need to reverse
the spot-futures transaction before the date of futures’ settlement. This eventuality may lead
to the basis risk.
4) Investors need to read KIM / SID for complete risk factors of investing in such schemes.
How is the Performance of existing Arbitrage Funds in India?
Now, let us look at some of the top performing arbitrage funds in India. Most of the arbitrage
funds gave 4.5% to 5.2%% returns in the last 1 year pre-tax (covid also has impacted with
low arbitrage opportunities).
Should you invest in the Mahindra Manulife Arbitrage Yojana Fund NFO?

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Mahindra Manulife Arbitrage Fund invests based on arbitrage opportunities. While in
general, such funds can provide better returns than liquid funds or overnight funds, Arbitrate
funds have under performed in the last 6 months. If you are low risk to moderate risk
investor and want to park your funds for a short term of 6 month period, then you can
consider investing in such funds. Alternatively you can invest in some of the top
performing liquid mutual funds which was always been favorite investment option for
investors who want to park surplus money.
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 One comment
One comment
Author Recent Posts
Suresh KP
Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified Investment
Adviser (Level-1), did MBA-Finance and has been analyzing financial markets in the
last 20 years.He tracks Mutual Funds, Stocks, Insurance Plans, Health insurance etc.
and provides various insights on this blog to help investors. He also provides various
business ideas for aspiring entrepreneurs. He can be reached at
suresh@myinvestmentideas.com

9. MJ
August 13, 2020 at 12:54 am
Thank you Sir..
Reply
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