Zerodha Arbitrage Fund
A low risk fund, treated as equity for taxation
NFO Starts
Aug 12
NFO Ends
Aug 14
Risk
Low
Min. Amount
₹5,000
Ideal for
About the fund
The Zerodha Arbitrage Fund is built for parking surplus money. Investors in higher tax brackets may consider this fund as an alternative to fixed deposits or debt funds
The Zerodha Arbitrage Fund is built for parking surplus money.
Investors in higher tax brackets may consider this fund as an alternative to fixed deposits or debt funds, allowing them to enjoy relatively low-risk, debt-like returns while taking advantage from the lower taxation of equity funds.
The fund invests in a mix of equity (minimum 65%), derivatives and debt instruments. While it majorly invests in equities, it behaves more like a debt fund because it doesn't depend on the stock market going up or down to generate returns. It aims to take advantage of temporary gaps in the price of a stock and other derivatives, so that gains can be locked in and captured. When these pricing gaps aren't available, the manager temporarily parks the money in short-term debt instruments to earn returns in accordance with the investment strategy.
This fund may be ideal for conservative investors looking to park surplus cash, usually a few months, in a tax-efficient manner.
You can start investing with ₹5,000 as a lump sum or at ₹1,000 as SIP (Post NFO).
Past Performance
Tax Implication
Investment period <= 1 year
Gains/profits are treated as short-term capital gains & taxed at 20% (plus 4% cess and surcharge, if any).
Investment period > 1 year
Gains/profits are treated as long-term capital gains and are tax-free upto ₹1.25 lakhs in a financial year. Gains above ₹1.25 Lakhs in a financial year are taxed at 12.5% (plus 4% cess and surcharge, if any).
Returns & Tax Calculator
Fund Manager
Kedar has an experience of 19 years in financial markets, across multiple roles at Aditya Birla Sunlife AMC Ltd (ABSLAMC), including fund management for passive products, where he managed 13 ETFs and Index Funds in equity & commodity. Kedar's belief in his own words is - "Passive investing uses the collective intelligence of the market instead of manually picking stocks and works for most investors."
Riskometer
Riskometer of the scheme
Riskometer of the scheme
Riskometer of the benchmark - Nifty 50 Arbitrage Index Index TRI
This product is suitable for investors who are seeking*:
- Short term parking of funds
- A low volatility investment strategy based on arbitrage opportunities in equity markets along with exposure to debt and money market instruments
Investors should understand that their principal will be at Low Risk
Note - The product labelling assigned during the New Fund Offer (NFO) is based on internal assessment of the scheme characteristics or model portfolio and the same may vary post NFO when actual investments are made.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
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Frequently Asked Questions
Tax Efficiency & Benefits
Returns from Fixed Deposits (FDs) and standard debt funds are added to your income and taxed at your full slab rate which can be as high as 30% plus surcharge for high earners.
Because the Zerodha Arbitrage Fund qualifies as an equity fund for taxation, your gains enjoy relatively lower tax rates:
Short-Term Capital Gains (STCG): Holding units for less than 12 months attracts a 20% tax rate.
Long-Term Capital Gains (LTCG): Holding units for over 12 months attracts a 12.5% tax rate (on gains exceeding ₹1.25 lakh per financial year).
Tax laws treat any fund that maintains a minimum of 65% allocation in Indian equities as an equity fund. The Zerodha Arbitrage Fund meets this threshold by holding at least 65% in equities and derivatives, giving you equity tax rates while keeping risk low like a debt instrument.
Fund Overview
The Zerodha Arbitrage Fund invests across:
Equity Shares: Minimum 65% to maintain equity status for tax purposes.
Derivatives (Futures): Used to fully hedge equity positions and lock in spreads. This reduces any market movement risk in the portfolio, hence providing steady fixed income type returns.
Short-term Debt Instruments: Used to park uninvested cash.
The Zerodha Arbitrage Fund makes money by generating temporary price differences (gaps) between a stock in the cash market and its futures contract in the derivatives market.
Because the fund simultaneously buys the stock and sells the futures contract, the return gap is locked in immediately. The returns do not depend on whether the stock market goes up, down, or sideways.
When pricing gaps shrink or derivative opportunities are limited, the Zerodha Arbitrage Fund temporarily parks cash in short-term debt instruments (like TREPS or treasury bills) to ensure your money keeps earning steady returns.
No. While the Zerodha Arbitrage Fund carries relatively low market risk, returns fluctuate based on prevailing market volatility, derivative spreads etc. There is no guaranteed capital safety or fixed return rate.
Suitable For
The Zerodha Arbitrage Fund may be ideal for conservative, higher tax bracket investors seeking better post-tax returns on idle cash than an FD, without taking on directional equity market risk.
The Zerodha Arbitrage Fund is designed for parking surplus cash for at least a few months (ideally minimum 3). This gives the fund enough time to bypass early withdrawal penalties, while ensuring that your investments get enough time to take advantage for market opportunities.
Costs and Tax Implications
Withdrawals within 30 days: An exit load of 0.25% applies.
Withdrawals after 30 days: 0% exit load. You can withdraw your money on any business day with standard settlement timelines (typically 2–3 business days).
The Base Expense Ratio (BER) will be disclosed following the closure of the New Fund Offer (NFO).
During the NFO - Min investment amount is Rs.5000/- and any amount thereafter.
Post NFO -
LumpSum - Min investment amount is Rs.5000/- and any amount thereafter.
SIP - Min investment amount is Rs.1000/- and any amount thereafter.