VR Logo

And Now, 'Enhanced' Arbitrage Fund NFO

Birla Sun Life MF has launched an NFO that’s eyeing other opportunities

With arbitrage opportunities slowing down in the market, many fund houses stopped fresh subscriptions in these funds. Expectations are that this category would be shunned for new fund offers. (See: Stalling Subscriptions)

But not Birla Sun Life Mutual Fund, which has unveiled a NFO titled 'Birla Sun Life Enhanced Arbitrage Fund', an open-end equity scheme, which gives clear indications that opportunities are available, but you also need to fish away from the usual beat.
The NFO opened for subscription on July 14, 2009 and will close on July 20.

These category of funds work on the principle of capitalising on arbitrage opportunities that arise out of a pricing mismatch of stocks in the equity and derivatives segments. This gives these funds the benefit of earning returns no matter if the market moves up or down.

This fund's investment objective is to generate income by investing predominantly in equity and equity related instruments and thereby take advantage from the price differentials/mis-pricing prevailing for stock/index in various market segments (Cash & Future).

The 'Enhanced' part of the scheme, that puts it in a different league, is that the fund may take directional equity exposure of up to 10 per cent of the corpus in equity and equity related securities and thereby enhance portfolio returns.

The aim of the scheme is to generate absolute returns above those of money market returns/liquid funds, with the onus or responsibility of doing that resting on the ability of the fund manager to identify opportunities in terms of price spread (difference) in the cash and derivative market.

The fund also is looking at opportunities arising out of corporate events like open offers, buy-backs, mergers, and initial public offers (IPOs).

As such, the asset allocation and investment plan of the fund include equities and equity linked instruments (65-90%); derivatives including index futures, stock futures, index options and stock options (65-90%); and debt securities and money market instruments (including securitised debt) (10-35%)

The scheme offers both a retail and an institutional plan with a common portfolio.

While the minimum application amount for the retail plan is Rs 5,000 and in multiples of Re 1 thereafter, for the institutional plan Rs 5,00,00,000 is the basic amount and thereafter in multiples of Re 1.

The fund is targetting a collection of a minimum amount of Rs 1,00,00,000 during the NFO period.

The NFO is priced at Rs 10 per unit.

The fund has been benchmarked against CRISIL Liquid Fund Index.

Also Read:
Stalling Subscriptions
Birla Sun Life Arbitrage Fund
The Lone Survivors
Risk-free Earners