What is an Arbitrage fund?

Arbitrage Fund is a type of mutual fund that influences the differential in price in cash and derivatives market for generation of returns. The returns are in turn dependent on the asset volatility. Arbitrage Fund is usually of hybrid nature and has the possibility of investment of a good portion of the portfolio in debt markets.

They generally serve well for the low risk-taking investors as they are an attractive option to invest their hard earned money. These usually bank on the inefficiencies of the market and earn profits for the investors. They are treated equally as equity funds in terms of taxes.