GEMGAZE

March 2013

High returns at minimal risk 

Who would not want to get high returns with minimal risk? Now the next question that arises is how is it possible to earn high returns while bearing low risk. Here Arbitrage Funds emerge as the apt answer. Arbitrage Funds basically try and cash in on the price variation of the same security in different markets. Equity investments fetch high returns but have high risk factor also attached with them. The dividend income from equity investments and long-term capital gains are tax-free. Arbitrage funds are attractive, as they behave like debt funds but the tax treatment for them is like that of equity funds.

All the GEMs that figured in the March 2012 GEMGAZE have retained their esteemed position in the March 2013 GEMGAZE also.

UTI SPREAD Fund Gem

UTI SPREAD Fund is a seven-year old five star fund with an AUM of a paltry Rs 27 crore. One of the best performing arbitrage funds, its average out performance has always been higher (average of 22 basis points) than that of the underperformance (4 basis points). That is definitely a reward for its bold stance that often goes against the general market trend. Its one-year return of 8.61% is lower than its category average of 9.78% at present. 27% of the portfolio is in equities, with services, energy, and engineering being the top three sectors. The entire assets allocated to equity are in 8 stocks. 24% of the assets are in debt with 49% in cash. The steep slide in allocation to equity compared to last year can partially explain the deterioration in one-year return. 20% of the portfolio is in large caps. While the portfolio turnover ratio is a massive 870.1%, the expense ratio is very low at 1%, an icing on the cake, indeed. The fund is benchmarked against the CRISIL Liquid Fund index. The fund has been managed by Mr.Harsha Upadhyaya since December 2006. 

HDFC Arbitrage Fund Gem

In its five-year old existence, HDFC Arbitrage Fund has been able to reach an AUM of a mere Rs 28 crore. This fund's trump card has been its resilience in a falling market. The one-year return of the fund is 8.95% as against the category average of 9.78%. There has been a sea change in the sector preference of this fund. The finance sector has occupied the top slot toppling healthcare sector to the fourth position. The sectors that come second and third in preference are energy and FMCG. Top 5 holdings constitute 33% of the portfolio. Equities constitute 69% of the portfolio with 48% in large cap stocks. The portfolio has 30 stocks and the portfolio turnover ratio is 51.94%. The expense ratio is as low as 0.87%. The fund is benchmarked against the CRISIL Liquid Fund Index and has been jointly managed by Mr. Anil Bamboli and Mr. Anand Laddha. Both have around 10 years of experience in research.

Kotak Equity Arbitrage Fund Gem

Incorporated in September 2005, Kotak Equity Arbitrage Fund has an AUM of Rs 124 crore. The one-year return of the fund is 9.74% as against the category average of 9.78%. The top three sectors are finance, services, and diversified, with large caps constituting 40% of the portfolio. Top five holdings constitute 32% of the portfolio, with the equity exposure continuing to be nil and debt constituting 32% of the portfolio. The portfolio turnover ratio is 189.41% and the expense ratio is 0.95%. The fund is benchmarked against the CRISIL Liquid Fund Index with Abhishek Bisen and Deepak Gupta efficiently managing the fund.

JM Arbitrage Advantage Fund Gem

The Rs 23 crore JM Arbitrage Fund, incorporated in 2006, has earned a 1-year return of 9.79% beating the category average return of 9.78%. Top five holdings constitute 41 % of the portfolio with finance, energy, and services forming the top three sectors. Equity constitutes 59% of the portfolio with 54% in mid and small cap stocks. There are 16 stocks in the portfolio. The portfolio turnover ratio is very low at 18.21%. The expense ratio is 1%. The fund is benchmarked against the CRISIL Liquid Fund Index. The fund is managed by Chaitanya Choksi.

SBI Arbitrage Opportunities Fund Gem

SBI Arbitrage Opportunities Fund, incorporated in October 2006, has an AUM of Rs 40 crore. Its one-year return is 9.63 %, a tad less than the category average return of 9.78%. The top five holdings constitute 41% of the portfolio. Services, metals, and finance are the top three sectors. 70% of the portfolio is made up of equity with 47% in large cap stocks. There are 19 stocks in the portfolio with a very high portfolio turnover ratio of 931%. The expense ratio is very high at 2.08%. The fund is benchmarked against the CRISIL Liquid Fund Index. The fund is managed by Suchita Shah.