Mutual Fund Status: 2024

Tuesday, May 28, 2024

At the outset we thank you for choosing to recommend our Schemes to your clients.

We are reaching out today, to draw your attention to one of our relatively new Scheme... Parag Parikh Arbitrage Fund (PPAF) - an open ended scheme investing in arbitrage opportunities.

Arbitrage Funds are a type of mutual fund that invests in securities with the aim of profiting from price differences between the 'cash' / 'spot' market and the 'Futures' market.

Hence, an arbitrageur could purchase stock A at Rs. 100/- in the cash market and simultaneously sell stock A in the Futures Market for Rs. 105/-, thereby locking in a relatively ‘low risk' profit of Rs. 5/- (less applicable transaction costs). This arbitrageur is now unaffected by any subsequent price movement in stock A.
(Please Note, this is for illustration purpose only.)

PPAF aims to replicate this process by undertaking simultaneous buy and sell transactions in spot and Futures markets whenever feasible, thereby generating relatively ‘low-risk' profit for its unitholders.

Tier 1 Benchmark Index: Nifty 50 Arbitrage Total Return Index (TRI).

As per current provisions, capital gains earned in PPAF will be taxed at par with equity-oriented' mutual funds.

This Scheme may suit your clients in case:

They are largely risk-averse and are seeking relatively ‘low risk’ returns, unaffected by market cycles.
They are not seeking a fixed amount of income every month.
They are in an income tax bracket which benefits from the relatively 'tax-advantaged' status which arbitrage funds enjoy compared to 'non equity-oriented funds'.

Conversely, it may not suit them in case:

They are seeking returns equivalent to those offered by 'equity oriented Funds'. Over longer time periods, these may be higher than those offered by Arbitrage Funds... but are also more volatile.
They are seeking to earn a fixed amount of income every month.
They are in an income tax bracket which may not benefit from the relatively 'tax-advantaged' status which arbitrage Funds enjoy compared to 'non equity oriented Funds'.

Visit this page in case you would like to view the Scheme Presentation and a few other details.

Please contact us in case you require any further information or clarifications.

Warm Regards,
Team PPFAS Mutual Fund

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