Arbitrage funds are in vogue. BNP Paribas MF is the latest fund house to launch its BNP Paribas Enhanced Arbitrage Fund. The NFO opened on December 8 and closes for subscription on December 22.
The fund will invest a minimum of 90% in equities, equity related instruments and derivatives and a minimum of 10% in debt securities and money market instruments with maturity of up to 91 days.
Unlike arbitrage funds which can only take advantage of plain arbitrage opportunities, BNP Paribas Enhanced Arbitrage Fund will take exposure in actively managed stocks within arbitrage opportunities that seeks to generate income through long/short strategy. Since this fund will take exposure in actively managed stocks, it is slightly riskier than a pure arbitrage fund.
Thanks to the equity status enjoyed by arbitrage funds, the category is fast gaining popularity among HNIs and institutional investors to park their short term surplus cash.
This is evident by the growing asset base in this category. As on March 2016, the category managed AUM of Rs. 23,250 crore, up 28% from Rs. 18,170 crore in April 2015, shows AMFI data. Reflecting this positive trend, the folios in this category have gone up from 50,000 to 81,000 during the same period.