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Debt-Plus-Arbitrage Fund of FundsTax-efficient option for investors with moderate risk appetite

Business Standard

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April 02, 2025

The new fund offer of UTI Income Plus Arbitrage Active Fund of Fund (FoF) is currently open.

- SANJAY KUMAR SINGH & KARTHIK JEROME

In recent times, several fund houses have converted their pure debt funds to pursue debt plus arbitrage strategies. The government took away the indexation benefit of debt funds from April 1, 2023. "This affected retail flows into debt funds. Fund houses are trying to address this issue by coming up with a hybrid format that improves tax efficiency," says Gautam Kalia, head-investment solutions and distribution, Mirae Asset Sharekhan.

How these funds workThese FoFs invest in a mix of debt and arbitrage funds. "The allocation will be to a debt fund that has a high credit quality and moderate duration. The rest of the portfolio will be in arbitrage. Since it will be a fully hedged equity portfolio, the return is likely to be relatively stable over two years," says Anurag Mittal, head of fixed income, UTI Asset Management Company.

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