Invest in These Top Arbitrage Mutual Funds in February 2025

An arbitrage fund is a mutual fund that seeks to earn profit from price differences in different markets. It does this by buying an asset at a lower price in one market and selling it at a higher price in another market at the same time. If an investor wants to invest their money for more than one year, and looking for the best after-tax return, they can consider investing in arbitrage mutual funds.

In other words, the fund managers in these schemes try to earn profit by taking advantage of price differences between the cash and derivatives markets. If they fail to discover such opportunities, they can invest in debt securities or stocks as an alternative.

In some cases, there can be fewer opportunities to make profits through arbitrage in the market. This normally occurs when the market keeps moving consistently in a particular direction. However, when the market is volatile, arbitrage funds find more opportunities to earn profits.

Arbitrage funds are taxed as same as equity mutual funds. If you hold them for more than a year, you will pay a 12.5% tax on the profits (long-term capital gains). If you sell before one year, you will be taxed at 20% on the profits (short-term capital gains).

Here are the top Arbitrage Mutual Funds in February 2025

Nippon India Arbitrage Funds

Kotak Equity Arbitrage Funds

Nippon India Arbitrage Funds: The fund is an arbitrage mutual fund scheme from Nippon India Mutual Fund. The scheme has Assets Under Management (AUM) of Rs. 14,738.76 Crore as of January 20, 2025. It has an expense ratio of 0.38%. It has returned an average annual return (CAGR) of 6.13% over the last five years, and in the previous year, it has returned 7.75%.

Kotak Equity Arbitrage Funds: The fund is an arbitrage mutual fund scheme from Kotak Mahindra Mutual Fund. The fund has Assets Under Management (AUM) of Rs. 54.913.13 Crore, as of January 20, 2025. It charges an expense ratio of 0.43%. From the last five years, it has delivered an average annual return (CAGR) of 6.23%, and in the past year, its price-to-earnings (PE) ratio is 35.06, and its return over the past year is 8.01%.