TRUSTMF Launches Arbitrage Fund NFO to Tap Price Gaps in Equities and Derivatives

Trust Mutual Fund has launched the New Fund Offer (NFO) for its TRUSTMF Arbitrage Fund – Direct (Growth), opening for subscription on August 18, 2025, and closing on August 22, 2025. The TRUSTMF Arbitrage Fund - Direct (G) is priced at ₹10 per unit and requires a minimum investment of ₹1,000. It falls under the hybrid category of Arbitrage Funds and carries no exit load. Mihir Vora will manage the fund.

The fund’s primary objective is to generate capital appreciation and income by leveraging arbitrage opportunities in the cash and derivatives segments of the equity market. It will also invest in short-term debt and money market instruments when arbitrage prospects are limited. While the aim is to deliver steady returns, there is no guarantee of achieving the stated objectives.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Investment Strategies of TRUSTMF Arbitrage Fund

The TRUSTMF Arbitrage Fund - Direct (G) will primarily deploy cash-future arbitrage, where stocks are purchased in the spot market and sold simultaneously in the futures market to lock in price spreads. This strategy aims to remain market-neutral, with returns unaffected by directional movements. Positions may be rolled over to subsequent contracts if profitable opportunities persist.

Other approaches include index arbitrage, exploiting price gaps between index futures and the weighted basket of underlying stocks, and event-driven strategies linked to corporate actions such as dividends, buybacks, mergers, and delistings. For instance, dividend arbitrage opportunities may arise when stock futures trade at favourable levels before ex-dividend dates.

Risk Management of TRUSTMF Arbitrage Fund

The Asset Management Company (AMC) has outlined multiple risk control measures, including diversification across sectors and market capitalisations to limit concentration risk, as well as maintaining liquidity to meet redemption obligations. Derivative transactions will be monitored under strict controls.

For debt investments, issuer-level exposure limits are defined based on instrument eligibility, liquidity, credit ratings, and maturity profiles. Interest rate risk will be managed through portfolio diversification and, where necessary, the use of interest rate derivatives. Credit risk will be mitigated by focusing on issuers with strong fundamentals and management quality.

Liquidity risk will be addressed by staggering maturities and prioritising liquid instruments. Volatility risks will be countered through diversification, and securitised debt investments will undergo rigorous originator evaluations.

Conclusion

With its structured strategies and risk controls, the TRUSTMF Arbitrage Fund aims to appeal to investors seeking stable, low-volatility returns through systematic exploitation of market inefficiencies. The fund’s hybrid approach allows flexibility in shifting between arbitrage plays and debt instruments, depending on prevailing market conditions.