Tata Arbitrage Fund Direct-Growth: Key Insights, Returns, Risks, and More

Investors, even when have a higher risk appetite, calculate risk before making any investments, which is a wiser decision of course. However, the stock market is inevitably volatile, and thus risk-averse investors, who are also looking for decent returns/earnings, find their best match in the hybrid category of funds, and among that Tata Arbitrage Fund Direct-Growth stands out as one of the popular funds. 

This article will help you navigate through the details of the Tata Arbitrage Fund. You will be reading all the insights about this fund, starting from its returns, to the risk involved, different financial metrics you can evaluate from here, and more. 

Fund Management and Objectives

Tata Arbitrage Fund Direct-Growth is a hybrid fund that invests in different arbitrage opportunities present in the cash and derivative markets and the remaining asset under management of the fund is invested in debt securities, and money market instruments. 

Sailesh Jain has been taking care of this fund since 10 December 2018. He is an MBA and a commerce graduate. He has years of experience in fund management and also served as the Vice President of IIFL, Quant Broking Pvt. Ltd. In IDFC Securities, he has served as head of derivatives. Apart from these, he also previously worked with Invesco Mutual Funds before joining Tata Mutual Funds. 

Want to Invest in the Tata Arbitrage Fund? Open a free Demat account Today!

How the Tata Arbitrage Fund Works?

To know how this fund works. You need to have an understanding of what is an arbitrage fund. Arbitrage investing or trading is where the difference in prices of an investment instrument is utilized to generate profits. Here, in this arbitrage fund, the same process is implemented where the price difference between cash and cash equivalents, or derivatives are utilized to make profits. 

Performance and Returns (As of 10 Jan 2025)

Since its inception, Tata Arbitrage Fund Direct-Growth has generated an annual return of around 6.43%. The fund has been consistent over the years and here is a detailed analysis of its performance and returns. 

5 Year Return: 6.28%

3 Year Return: 7.11%

1 Year Return: 8.29%

YTD Return: 0.31%

6 Month Return: 3.84%

3 Month Return: 1.98%

The Tata Arbitrage Fund consistently delivers almost double return when compared to the CCIL T Bill Liquidity Weight. The performance of the fund has remained consistent over the year and helps investors generate regular income. 

The fund has not only generated higher returns than CCIL T Bill has but also it is one of the top-performing funds in the hybrid arbitrage fund category. For all the periods stated above, the fund has performed better than the category averages. 

Investment Allocation (As of 30 Nov 2024)

The Tata Arbitrage Fund portfolio holds 68.13% cash and cash equivalents with 31.57% share debt instruments, and equity is negligible at 0.3%

Here is the investment allocation according to market capitalization – 

• Giant Cap: 45.22%
• Large Cap: 37.33%
• Mid Cap: 17.26%
• Small Cap: 0.19%

Investment allocation as per Ratings – 

• Cash Equivalents – 68.13%
• AAA – 26.98%
• AA – 2.7%
• SOV – 1.87%
• Unrated/ others – 0.03%

The top holdings of the Tata Arbitrage Fund include – 

Equity Segment 

• Reliance Industries – 4.96%
• Tata Motors – 2.25%
• ICICI Bank – 2.08%
• Indusind Bank – 1.95%
• Bank Of Baroda – 1.61%

Debt Segment 

• Tata Money Market Direct-Growth – 12.36%
• Cholamandalam Investment & Finance Company Ltd. CP 277 – D 24/01/2025 – 1.77%
• Bharti Telecom Ltd. SR XII Debenture 8.60 05/12/2024 – 1.39%
• ICICI Securities Ltd. CP 365 –D 06/03/2025 – 1.36%
• National Bank For Agriculture & Rural Development SR Debenture 570 22-D 31/07/2025

Key Metrics 

As of 30 November 2024, the fund has an expense ratio of 0.30%, which is a bit lower than the category average of 0.34%.

Fund Details	Information
AUM (Assets Under Management)	₹ 12589 Crore as of 30 November 2024
Category	Hybrid Fund
Fund Managers	Sailesh Jain
Exit Load	0.25% for redemption of more within 30 days
Entry Load	Nil
Minimum Investment	₹5000(Lump sum)₹ 150 (SIP)
Benchmark	NIFTY 50 Arbitrage TRI

The Tata arbitrage fund direct plan growth NAV as of 10 January 2025 stood at ₹14.5980. 

Risk and Performance of the Tata Arbitrage Fund ( As of 31 Dec 2024)

This fund is classified as a ‘Low Risk’ fund, which indicates that the fund offers a stable return usually without much volatility. 

1. Standard Deviation (Std Dev %): It shows how much the returns vary from the average returns generated by the funds themselves. The higher this number, the more it fluctuates.

This fund has a standard deviation of 0.60% while the average standard deviation of the hybrid arbitrage funds is around 0.61%. This indicates that the Tata Arbitrage Fund is less volatile than its peers are. However, the difference with the CCIL T Bill Liquidity Weight is wide, which has a standard deviation of around 0.40%. This indicates that the fund is more volatile than the CCIl T-Bills. 

2. Sharpe Ratio: This ratio indicates the return you get for the risk you’re taking. A higher number means better risk-adjusted returns.

Currently, this fund has a Sharpe ratio of 1.44%, which indicates that the fund has been performing well compared to the market’s peers. The CCIL T-Bill has a Sharpe ratio of -5.28% while the average for the category is 1.04%. 

3. Sortino Ratio: It is similar to Sharpe but only looks at downside risk (the risk of losing money).

Similar to the Sharpe ratio, this fund has lower downside risk compared to its peers. While the average for the category stands at 1.21%, this Tata Arbitrage Fund Direct-Growth has a negative 1.76% Sorting ratio. 

4. Beta: This ratio indicates the volatility of the fund’s performance, compared to similar funds in the market. The lower the Beta, the more predictable the returns are, and vice versa. It helps in comparing funds. 

Tata Arbitrage Fund is minutely more volatile than its peers as it has a Beta of 0.80% while the average for the hybrid arbitrage fund category is 0.75%. 

5. Alpha: It measures the extra return the fund gives above the market’s average return.

The fund again has a higher alpha than its peers do, which means the extra returns offered by the fund are comparatively higher. The average for the category is around 2.22% while that of the fund is only 2.56%%.  

Taxation for Tata Arbitrage Fund 

If you’re investing in the Tata Arbitrage Fund, here’s how your returns will be taxed:

1. Short-Term Gains – If you redeem the fund units within 1 year of investment or 365 days, a 20% tax will be levied on the entire return generated during the period. 
2. Long-Term Gains – If you redeem the units after one year, any profit generated over and above ₹ 1.25 lakh will be taxable at a 12.5% rate. The same rate will be applicable for any investment tenure above 1 year. 

The longer you hold on to your investments, the better returns you can expect!

3. Taxes on Dividends – Dividends earned if any will be taxable at the hands of investors as per their tax slabs. If the dividend income surpasses Rs. 5000 in a financial year, then the fund house will deduct 10% TDS before disbursing the dividend into the account of the investor. 

Minimum Investment and Lock-in Period

The minimum investment amount in the Tata Arbitrage Fund is ₹5000 for lump sum and for SIP, it is ₹150. There is no lock-in period for the Tata Arbitrage Fund Direct – Growth.

Invest in the Tata Arbitrage Fund — SIP or lump sum at zero brokerage!

How to Invest in Tata Arbitrage Fund Direct?

You can invest in the Tata Arbitrage Fund Direct-Growth plan with Shoonya. 

Shoonya offers a free Demat account, zero brokerage trading, advanced trading tools, 100+ technical indicators, and much more!

Investing in Lump Sum Mutual Funds through the Shoonya Web Platform

Here’s a quick guide on how to invest in lump sum mutual funds through the Shoonya web platform:

1. First, you must log in to your Shoonya account at trade.shoonya.com. From the “Orders” section, click on “MF order.”
2. Search for the fund you wish to invest in; in this case, the Tata Arbitrage Fund Direct-Growth plan.
3. Choose “Fresh” for a new investment and enter the amount you want to invest.
4. You can complete your purchase by clicking the “Purchase” button.
5. You will receive a payment link on your registered email. Use the link to make the payment.

After payment, your mutual fund units will be allotted to your Demat account within T+2 days.

Note: You can only make the payment using the bank account registered with your Demat account.

Setting Up an SIP for Mutual Funds

If you prefer a Systematic Investment Plan (SIP) for Tata Arbitrage Fund Direct Plan-Growth plan, you must follow these steps:

1. First, you need to log in to your Shoonya account at trade.shoonya.com. Go to “Orders” and click on “XSIP.”
2. Find the mutual fund for which you want to set up an SIP. In this case, the Tata Arbitrage Fund Direct-Growth plan.
3. If this is your first SIP with Shoonya, you need to create a Mandate ID. 

For that, you must enter the mandate amount and the validity date (until you want to keep your SIP active).

4. You must submit the details, and you’ll receive a Mandate authentication link via email. Approval generally takes 24 hours.

Once your Mandate is approved, you can follow these steps to set up your SIP:

1. Go to “XSIP,” enter the SIP amount, and select “Fresh” as the transaction type.
2. Choose the date when the SIP will be debited directly from your registered bank.
3. The approved Mandate ID will auto-reflect.
4. Choose “Monthly” for monthly debits and specify the number of installments (e.g., 24 installments for a 2-year SIP).

If you do not want to forget your SIPs and invest systematically, the SIP method can be most suitable for you. 

Why Invest in the Tata Arbitrage Fund?

Investing in Tata arbitrage fund Direct-Growth can help you generate stable returns where the volatility is less, and so is the risk. Investing in this fund can also help in the diversification of the investment portfolio, as this fund invests primarily in cash and cash equivalents and debt instruments. This fund has having similar risk-return profile to of a liquid fund, which makes it a safer investment option. 

Suitability of this Fund| Who Should Invest?

The Tata Arbitrage Fund Direct is suitable for investors who:

• Are looking for lower-risk or risk-averse investors 
• Want to make a profit out of market inefficiencies 
• People looking for investment options that offer higher than the Bank’s interest rate on savings accounts or FDs
• Are looking for a risk-return profile like a liquid fund
• Seeking taxation like an equity fund with a higher post-tax return
• People who fall into higher tax bracket
• Who are looking to park their funds for three months to max one-year

Conclusion

So, if you want to park your money in a well-diversified risk fund then Tata arbitrage fund direct growth can be a good option. It is offering returns higher than the category average and has a stable track record. However, the low-risk profile of the fund doesn’t guarantee the preservation of the capital, thus invest after analyzing all the aspects and your investment goals. 

FAQs| Tata Arbitrage Fund Direct Plan-Growth plan

Source: ValueResearch

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.