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| Home > Offerings > Equity Funds > IDFC Arbitrage Plus Fund |
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| The Scheme aims to provide absolute returns by taking advantage of opportunities/ pricing inefficiencies in equity cash and derivative markets. The scheme will target low volatility with low correlation to the equity market returns. Substantial allocation will be to cash and carry arbitrage. The various strategies used are briefly described below |
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| Cash-Future Arbitrage |
| Strategy involves taking a long position in the spot market and
a short position in the future market of the same stock. Since
the position is certain to converge on the day of derivative
expiry the strategy is low-risk in nature. This tends to perform
well in positive and neutral market condition. |
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| Pair Trading |
| This involves taking a long position in one stock and
simultaneously taking a short position in another stock to
exploit relative value aberrations. The trades are selected
using a statistical model and use stocks that belong to the
same sector and have a high correlation. In a rising market the
Long Position should go up more than the short position while
in a falling market, the Long Position should fall less than the
short position. |
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| Event Play |
| This involves taking a position in companies where a corporate
event creates an arbitrage opportunity. One example of the
same is in cases when a set of buyers make an 'open offer' to
the shareholders of a company as per SEBI takeover
guidelines. In case the open offer price is at a premium to the
prevailing price, arbitrage may be possible Other corporate
actions that may give rise to such opportunities are Mergers &
Acquitions, buybacks, delisting and dividends |
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| Alpha Trading |
| This involves taking a long position in one stock and
simultaneously taking a short position in another stock. The
trade seeks to capture the out performance of one stock/
sector relative to the another stock/sector. The position can
also use indices in place of individual stocks. |
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| Options Trading |
| Cash-future spreads improved with the continued rally in
equity markets. The fund was able to successfully roll-over its
futures positions related to arbitrage. The fund exited its pair
trade positions as markets moved up sharply affecting the
same. |
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