The industry received Rs.19,570 crore in arbitrage funds in the first six months of the current financial year. This is 26% of the overall equity inflows between April and September 2017. The industry received net inflows of Rs.76,065 crore in the first half of FY 2017-18. AMFI has shared this data with MF CEOs recently.
Arbitrage funds witnessed net inflows of Rs.13,475 crore in the corresponding period last year.
The data further shows that arbitrage funds witnessed the highest inflows of Rs.6,304 crore in July. The category witnessed outflows (negative inflows) only once in June due to quarter end.
Source: AMFI
This has led to growth in assets of arbitrage funds. The AUM of arbitrage funds increased to Rs.55,921 crore which is 10% of the total equity AUM excluding ELSS, balanced and equity ETFs as on September 2017.
Experts say arbitrage funds have gained popularity among HNIs as they use these funds as alternative to liquid funds and ultra-short term funds due to favourable tax treatment and regular dividends.
The popularity can also be shown with the help of the gross sales number which doubled in the last six months. In fact, sales under arbitrage funds were 27% of total sales under equity schemes in September.
The folio count of the arbitrage funds has also been increasing on a monthly basis. Folios of arbitrage funds increased by 46,116 from 1.2 lakh folios in April 2017 to 1.66 lakh folios in September 2017. The percentage share of arbitrage folios to the overall equity folios has marginally increased from 0.33% to 0.51% in six months. The total equity folio stood at 3.67 crore in September 2017.
Value Research shows that presently there are 18 arbitrage funds with AUM ranging from Rs.10 crore to Rs.10,000 crore. The funds have delivered one-year return ranging between 4.8% and 6.11%.