Arbitrage funds, once popular for parking idle cash, are seeing reduced investor interest. Inflows have dropped significantly amid rising costs and new regulations.
Arbitrage funds, part of the hybrid fund category, have traditionally been a go-to option for investors managing surplus cash. However, their appeal is waning as inflows decline sharply. Key factors include escalating costs, such as higher transaction charges including STT charges, which are eroding profitability. Additionally, regulatory tightening now mandates investments in short-term government bonds, further pressuring returns. This combination is diminishing investor appetite for these mutual funds. The shift reflects broader challenges in the category, making arbitrage funds less competitive for those seeking efficient cash deployment.
