Edelweiss Income Plus Arbitrage Active FOF: Smart Hybrid Approach for Balanced Returns

The Edelweiss Income Plus Arbitrage Active Fund of Funds is an open-ended fund-of-funds scheme offered by Edelweiss Mutual Fund. This scheme aims to generate long-term capital appreciation by investing in units of actively managed debt-oriented mutual fund schemes and actively managed arbitrage mutual fund schemes. By combining debt investments with arbitrage opportunities, the NFO provides investors with a diversified approach that seeks to balance income generation and capital appreciation. The fund provides flexibility to shift allocation between debt and arbitrage based on market conditions such as interest rate outlook, arbitrage spreads, and liquidity factors. It is designed for investors who wish to access professional management and diversification across asset classes through a single investment.

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Key Features of Edelweiss Income Plus Arbitrage Active Fund of Funds

• Opening Date: July 3, 2025
• Closing Date: July 15, 2025
• Exit Load: Nil
• Minimum Investment Amount: ₹100 (in multiples of ₹1 thereafter)
• Fund Type: Open-ended Fund of Funds
• Benchmark: 60% Nifty Short Duration Debt Index + 40% Nifty 50 Arbitrage TRI

Objective of Edelweiss Income Plus Arbitrage Active Fund of Funds

The Edelweiss Income Plus Arbitrage Active Fund of Funds-Dir (G) seeks to achieve long-term capital appreciation by investing in units of actively managed debt-oriented mutual fund schemes and actively managed arbitrage mutual fund schemes. There is no guarantee that the scheme will achieve its objective.

Investment Strategy of Edelweiss Income Plus Arbitrage Active Fund of Funds

• Investments primarily in units of actively managed debt and arbitrage mutual fund schemes
• Allocation between debt and arbitrage is adjusted based on interest rate outlook, arbitrage spreads, credit risk, and market liquidity
• Debt exposure focused on high-quality instruments to manage interest rate and credit risks
• Arbitrage opportunities are identified between the cash and derivatives markets to generate potential returns
• The Fund Manager monitors bond market dynamics, government borrowing trends, and economic indicators to guide investment decisions
• Exposure is adjusted dynamically to optimise risk-adjusted returns while maintaining liquidity

Risks Associated with Edelweiss Income Plus Arbitrage Active Fund of Funds

• Market Risk: Investments are subject to fluctuations in securities markets due to economic, political, and market developments
• Fund of Funds Risk: Returns depend on the performance of the underlying schemes; underperformance of any scheme may affect overall returns
• Liquidity Risk: Difficulty in selling underlying fund units or securities during market stress may impact redemptions
• Concentration Risk: High exposure to selected securities or sectors may increase volatility
• Credit Risk: Default or downgrade of debt securities may adversely affect returns
• Interest Rate Risk: Rising interest rates may reduce the value of fixed-income investments
• Currency Risk: Overseas investments, if any, are exposed to currency fluctuations
• Behavioural Risk: Investor sentiment and market psychology can cause price swings
• Reinvestment Risk: Cash flows may be reinvested at lower interest rates during declining rate environments

Risk Mitigation Strategy by Edelweiss Income Plus Arbitrage Active Fund of Funds

• The Edelweiss Income Plus Arbitrage Active Fund of Funds-Dir (G) employs multiple risk mitigation techniques to protect investor capital and optimise returns. 
• For debt exposure, the fund focuses on high-credit-quality securities to minimise default risk and maintains diversified holdings to avoid concentration. 
• Interest rate risk is actively managed by adjusting portfolio duration based on market outlook. For arbitrage investments, thorough monitoring of price differentials between cash and derivatives markets helps capitalise on opportunities while reducing exposure to directional market risks. 
• Liquidity is maintained by investing in marketable instruments such as TREPs and liquid assets. 
• The scheme benefits from active management at both the fund of funds and underlying scheme levels to continuously assess market conditions and adjust allocations accordingly.

What Type of Investor Should Invest in Edelweiss Income Plus Arbitrage Active Fund of Funds?

• Investors seeking exposure to both debt and equity arbitrage strategies within a single fund
• Those with a moderate risk appetite looking for potential long-term capital appreciation
• Individuals preferring professional management and diversified asset allocation
• Investors are comfortable with the risks associated with debt markets and arbitrage-based investments
• Suitable for investors with a medium to long-term investment horizon who seek relatively stable returns with controlled volatility