PLUTUS ARBITRAGE PLUS

Investment Objective:

Generate a post-tax post expense return of ~ 3% p.a. over Arbitrage Funds

Overview
  • This strategy aims to improve the returns over arbitrage funds for investors.
  • Arbitrage Funds are an alternative to Liquid Funds as short-term investments. Their returns are more tax efficient than liquid funds since returns from arbitrage Funds are taxed as returns from equity. They do not carry any open positions and are much less volatile than equity investments.
  • Arbitrage Plus uses a proprietary derivative strategy that entails selling puts and calls with Nifty being the underlying to generate Alpha.



Advantages
  • Generate Alpha for the client over the returns from Arbitrage Funds
  • Risk is mitigated and capped at 4% of the amount invested
  • Underlying investments are liquid and can be redeemed at short notice
Inception Date:

1st Jan 2019

Minimum Investment:

5 Cr.

Benchmark:

Crisil Liquid Index

Fees:

0.75% pa

Exit Option:

While the investor can exit on a daily basis, we suggest investors to stay invested for at least one-month.

Process

The investor needs to hold/purchase Arbitrage Funds in Demat form. The units will be held in the dividend reinvestment option. The units would be used as margin to run the Plutus Alpha strategy.

October 2019 Performance
Arbitrage Funds* Plutus Alpha Total Fund Returns Crisil Liquid Returns
0.66% 0.24% 0.90% 0.51%

*Average of Edelweiss Arbitrage, IDFC Arbitrage, UTI Arbitrage, Reliance Arbitrage Fund returns** The above returns are pre-tax

October commentary

The roll spread (annualized) on the arbitrage funds is approximately 5.4%. Average arbitrage spreads have improved from 5.1% last month to 5.4% this month, on the back of aggressive long rolls by the AIF, domestic and retail participants. The key factor contributing to the expansion of arbitrage spreads has been the improvement in equity markets.

October was another successful month for our strategy of selling options. During the middle of the month with the Nifty at 11,375, we sold the 11,900 call and covered at 12,100 and also sold the 10,700 put and covered at 10,500. The markets remained well within this range till Diwali, but in the last three days of the settlement, the Nifty gained 325 points on the back of strong FII and retail buying. Therefore, on the clearing day (31st October), we closed out the call positions through the day and made a return of 0.24% for the month.

Process Logo

Arbitrage Plus Strategy Vs Crisil Liquid Fund Index
(Month on Month comparision)

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Performance Comparison (As on 31st October 2019)
Returns 1 Month 3 Months 6 Months Since Inception (10 months)
Plutus Arbitrage Plus 0.90% 2.96% 5.06% 9.83%
Arbitrage Funds* 0.66% 1.47% 3.27% 5.56%

*Average of Edelweiss Arbitrage, IDFC Arbitrage, UTI Arbitrage, Reliance Arbitrage Fund returns. The above returns are gross of fees and taxes. Past performance is not indicative of future performance