Mumbai: Canara Robeco Mutual Fund has filed draft documents with the Securities and Exchange Board of India (SEBI) for its proposed ‘Canara Robeco Arbitrage Fund’. The open-ended scheme will allow investors to invest and redeem units on regular business days.
The fund aims to generate returns by capitalising on price differentials between the cash and derivatives segments of the equity market. Any residual amount may be invested in debt instruments as per regulatory guidelines. Returns are not guaranteed.
New Fund Offer (NFO) dates have not yet been announced. As per the draft, the NFO will remain open for a minimum of three working days and a maximum of 15 days. Units will be issued at ₹10 during the NFO period; thereafter, the price will be based on the prevailing Net Asset Value (NAV).
Investment Thresholds and Facilities
The minimum lumpsum investment is set at ₹5,000, with additional purchases possible in multiples of ₹1,000. Systematic Investment Plans (SIPs) can start from ₹1,000 per month or ₹2,000 per quarter. The scheme will also offer Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP) facilities.
During the NFO, investors will have the option to transfer money from select debt schemes in four equal instalments.
How the Strategy Works
Arbitrage involves seeking to profit from price differences of the same stock across markets. For instance, if a stock trades at ₹1,000 in the cash market and ₹1,010 in the futures market, the fund manager may execute offsetting trades to capture the spread. Actual returns will depend on expenses and prevailing market conditions. The scheme’s benchmark will be the Nifty 50 Arbitrage Index (TRI).
Exit Load and Redemption
An exit load of 0.25 per cent will apply if units are redeemed or switched within 15 days of allotment. No exit load will be charged thereafter. Under normal circumstances, redemption proceeds will be credited within three working days. Regular investment and redemption facilities are expected to commence within five working days of unit allotment.
Suitability and Risk
The scheme is positioned as an option for investors who prefer an arbitrage-based approach rather than direct equity exposure. It has been classified in the Low Risk category on the riskometer. However, arbitrage funds are not entirely risk-free. Limited price differential opportunities in the market and risks associated with debt investments can affect returns. Prospective investors are advised to assess their risk appetite, investment horizon and financial goals before investing.
