HDFC Arbitrage Fund

The HDFC Arbitrage Fund aims to capitalize on the arbitrage opportunities arising out of cash and derivatives markets. It was incepted in September 2007 and is offered by HDFC Asset Management Company, among the largest mutual fund houses in India.

Type of fund

This is an open ended equity mutual fund under arbitrage category.

Investment objective

The objective here is to generate income through investments predominantly in arbitrage opportunities among cash and derivative market as well as within the derivatives market through surplus cash deployment in money market instruments and debt securities.

Fund information

Inception date 01/09/2007
CRISIL rank Not Ranked
Schemes

•Direct Plan – Growth Option

•Direct Plan – Dividend Quarterly Option

•Retail Plan – Growth Option

•Retail Plan – Dividend Option

•Retail Plan – Dividend Quarterly Option

•Wholesale Plan – Growth Option

•Wholesale Plan – Dividend Option

•Wholesale Plan Dividend Option Direct Plan

•Wholesale Plan Growth Option Direct Plan

•Wholesale Plan Monthly Dividend Option Direct Plan

Entry load 0%. Any upfront commissions to be paid by investor directly to ARN holder.
Exit load 0.25% if redeemed within 1 month
Minimum investment

•Wholesale Plan – Growth/Dividend option: Rs.1 lakh and any amount thereafter

•Retail Plan – Rs.5,000 minimum investment, Rs.5,000 subsequent investment.

SIP

•Minimum Rs.500 for monthly subscription

•Min. Rs.1,500 for quarterly subscription

Product label – Risk and target investors Moderately Low risk. Meant for short term investors looking at income through arbitrage opportunities arising out of cash and derivatives market, as well as within the derivatives segment.
Benchmark CRISIL Liquid Fund Index. This index aims to track the performance of debt portfolio which includes commercial papers (CP), Certificates of Deposit and CBLO.
SWP Yes. Available in Fixed and Variable variants. Frequency of withdrawals are monthly, quarterly half yearly and yearly for Fixed SWP and quarterly, half yearly and yearly for Variable SWP.
STP Yes. Available in two variants namely Fixed Systematic Transfer Plan (FSTP) and Capital Appreciation Systematic Transfer Plan (CASTP). Daily, Weekly, Monthly and quarterly transfer plans are available.
Redemption Proceeds to be dispatched within 10 days
Taxation (on investment and on redemption) As per applicable sections under the Income Tax Act.

Fund manager(s)

Mr Rakesh Vyas come with over 8 years of experience of which 5 years were in equity research and 3 years in application engineering. He is a veteran fund manager and manages several funds for HDFC Mutual Funds including HDFC Capital Builder Fund, HDFC Balanced Fund, HDFC Multiple Yield Fund Plan 2005, HDFC Mid Cap Opportunities Fund and HDFC Short Term Opportunities Fund etc. He has a B.E. Electrical degree and a PGDM from XLRI Jamshedpur. He has previously worked with Lehman Brothers and Nomura.

Mr Anil Bamboli has CFA qualification from AIMR, USA. He has a Master’s in Management Studies in Finance as well as graduation on Cost and Works Accountant from ICWAI. He has previously worked with SBI Fund management. He manages several other funds from HDFC AMC such as HDFC Short term Direct Plan, HDFC Multiple Yield Fund Plan, HDFC Cash Mgmt. Savings and HDFC Gilt Short Term Plan, among others.

Investment philosophy

The fund invests mainly in the opportunities arising out of arbitrage between cash and derivatives markets as well as within the derivatives market. Dynamic rates of commodities or securities in different markets is capitalized by this investment. The equity markets have seen high growth in the last few years and investors are able to derive returns from expected cost of carry between underlying and derivatives market. The collective risk that the scheme carries is that of the market being neutral, thereby implying that no specific equity risks exist. Any investments in mutual funds should be done only after discussions with your personal financial advisor.

Portfolio – Sector / Top 10 holdings*

Name Sector Class Allocation (%)
9.3% Indiabulls Housing Finance Ltd 2016 Financial Debenture 9.75
Reliance Industries Ltd Energy Equity 8.76
HDFC Bank Ltd Financial Equity 8.72
Axis bank Ltd Financial CBLO 7.98
Axis bank Ltd Financial Fixed Depo 7.98
ICICI Bank Ltd Financial Equity 6.62
Simplex Infrastructure Ltd Construction CP 4.80
Infosys Ltd Tech Equity 3.92
Kotak Mahindra Bank Ltd Financial Equity 3.75
Andhra Bank Financial CBLO 3.27

*As on 31st July 2015 (Retail Fund – Growth)

Risk measures

Standard Deviation 0.47%
Sharpe Ratio 1.95
Alpha 1.28%
Beta 0.28

Performance*

AUM Rs.514 crores (Retail Growth)
NAV

•Direct Plan – Growth Option: Rs.17.7170

•Direct Plan – Dividend Quarterly Option: Rs.13.4250

•Retail Plan – Growth Option: Rs.17.5770

•Retail Plan – Dividend Option: Rs.13.0530

•Retail Plan – Dividend Quarterly Option: Rs.12.4920

•Wholesale Plan – Growth Option: Rs.17.8710

•Wholesale Plan – Dividend Option: Rs.10.4460

•Wholesale Plan Dividend Option Direct Plan: Rs.10.5840

•Wholesale Plan Growth Option Direct Plan: Rs.11.1760

•Wholesale Plan Monthly Dividend Option Direct Plan: Rs.10.3650

Expense Ratio

•0.90% on Regular Plan

•0.75% on Wholesale Plan

Direct plans have a lower expense ratio by 0.60%

*As on 4th September 2015

Benchmark comparison*

Compounded Annualised Returns
Scheme Returns (%) **
Benchmark Returns (%) **
  Wholesale Retail Wholesale Retail
Returns for last 1 year 7.80 7.55 6.21 6.21
Returns for last 3 years 6.48 6.22 6.22 6.22
Returns since inception 6.89 6.62 6.28 6.28

*As on 31st July 2015

**Wholesale Plan and Retail Plan Growth Options

Expert view of the fund

The HDFC Arbitrage Fund is hybrid in nature and is slanted towards mid cap companies. About 2/3rd of the portfolio is made up of equity and equity related instruments with the remaining filled up with debt and money market instruments. The fund has beaten the benchmark returns for the most part and is a good option for long term investors looking at retirement planning, home buying or marriage or education of children. You should always consult with your personal financial advisor before investing in risky instruments such as mutual funds.

How to apply

HDFC MF offers both online and offline routed to apply for mutual fund investments.

  • Online
  • Investors can use the dedicated portal for online applications called as HDFCMFOnline to apply for mutual funds investment. The portal is easily accessible and you can open an account once you have generated your HPIN number after fulfilling the KYC norms. You can make payments through multiple avenues such as cash transfer, card payments etc. You can also use third party websites that deal with mutual fund applications, however this should be done after due consideration of the background of the provider.

  • Offline
  • Investors can directly approach any branch of HDFC that accepts MF registrations or the exclusive MF outlets to fill and submit forms and supporting documents. The process is quite simple and doesn’t take much time. Alternatively, you may approach dealers and distributors for help with the application process, however it is advised to check the credentials of a dealer before using his/her services.

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Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

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