An arbitrage fund is a kind of mutual fund that attracts investors who want to take advantage of volatile markets without taking too much risk.
It is crucial to understand how they work and whether they make sense for your portfolio before investing in one.
Arbitrage funds work by exploiting the price differential between assets that should theoretically have the same price.
One of the most important types of arbitrage takes place between the cash and futures markets. Arbitrage funds also invest part of their capital in debt
securities that are generally regarded as highly stable. The fund invests more heavily in debt when there is a shortage of profitable arbitrage trades.
This makes this type of fund very attractive to low-risk investors.
Arbitrage Hybrid Fund :
In both stocks and bonds, these mutual funds invest. The emphasis is on arbitration for stocks so that stock price fluctuations do not have an impact,
but the fund will produce guaranteed returns over a period of time from the availability of arbitration in stock / future prices.