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Plain-English definition

What is Arbitrage fund?

An arbitrage fund seeks to capture price differences between cash and derivative markets while maintaining the category's required equity exposure.

Reviewed by Kshitij Jain, Principal Officer · SEBI Investment Adviser INA000022172 · Updated 24 October 2026

How Arbitrage fund works

Its return comes mainly from available spreads and collateral income, not from a guaranteed rate. Spreads can narrow, expenses matter and short holding periods can face exit load or negative outcomes.

A rupee example

If a share trades at ₹100 in cash and its future at ₹101, a matched position targets the ₹1 spread before costs and market mechanics.

The example isolates one idea so the arithmetic is visible. Real outcomes can include taxes, fees, cash-flow timing and market movement that the simplified example does not model.

Why it matters for your family

Arbitrage funds can behave differently from ordinary equity funds, but families should compare liquidity, tax, horizon and post-cost outcome with other parking options.

Questions people ask

What does Arbitrage fund mean?
An arbitrage fund seeks to capture price differences between cash and derivative markets while maintaining the category's required equity exposure.
Why does Arbitrage fund matter for a family?
Arbitrage funds can behave differently from ordinary equity funds, but families should compare liquidity, tax, horizon and post-cost outcome with other parking options.
Where can I verify information about Arbitrage fund?
Start with SEBI Investor, linked on this page, and the current official document for the product or tax year involved.

This page is general education, not personalised investment or tax advice. Rules can change; verify current official documents before acting. Investment in securities markets is subject to market risk.