NFO Alert: WhiteOak Capital Mutual Fund Introduces Arbitrage Fund

Introduction to WhiteOak Capital Arbitrage Fund

WhiteOak Capital Mutual Fund has unveiled its latest offering, the WhiteOak Capital Arbitrage Fund, designed to capitalize on arbitrage opportunities within the equity markets. This open-ended scheme offers a strategic blend of equity, debt, and money market instruments, aimed at generating returns with minimal risk. The New Fund Offer (NFO) is set to open on August 28, 2024, and will close on September 3, 2024.

Investment Strategy and Portfolio Allocation

The WhiteOak Capital Arbitrage Fund’s core investment strategy revolves around exploiting arbitrage opportunities in the cash and derivatives segments of the equity market. Arbitrage opportunities arise when there are price differences between a stock’s price in the cash market and its price in the derivatives market. The fund intends to take advantage of these inefficiencies to generate returns while keeping risk at a manageable level.

Asset Allocation

Under normal circumstances, the fund will allocate a substantial portion of its assets—between 65% and 100%—to equity and equity-related instruments, including derivatives. The remaining assets, up to 35%, will be directed towards debt securities and money market instruments. Additionally, up to 10% of the fund’s assets may be invested in units issued by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Defensive Allocation Strategy

In situations where suitable arbitrage opportunities are scarce or market conditions are unfavorable, the fund has a defensive allocation strategy. During such times, the fund may reduce its equity exposure to as low as 0% and increase its allocation to debt securities and money market instruments up to 100%. This approach aims to protect capital while still seeking to generate returns.

Key Features of the Fund

The WhiteOak Capital Arbitrage Fund comes with several notable features, designed to offer flexibility and accessibility to a wide range of investors:

• Minimum Investment: The minimum lump sum investment amount is set at Rs 500, with subsequent investments allowed in multiples of Re 1. For investors preferring the Systematic Investment Plan (SIP) route, the minimum investment amount is Rs 100, with at least six installments required for weekly, fortnightly, or monthly SIPs.
• Exit Load: An exit load of 0.25% will be applicable if units are redeemed or switched out within seven days from the date of allotment. However, no exit load will be charged if the units are redeemed or switched out after this period.
• Fund Management Team: The fund will be managed by a seasoned team, including Ramesh Mantri and Ashish Agrawal for equity investments, and Piyush Baranwal for debt investments. Their combined expertise is expected to drive the fund’s performance and ensure adherence to its investment objectives.
• Benchmark: The scheme is benchmarked against the Nifty 50 Arbitrage TRI, which reflects the performance of the top 50 companies listed on the National Stock Exchange (NSE) and the arbitrage opportunities within them.

Tax Efficiency and Suitability

One of the key advantages of the WhiteOak Capital Arbitrage Fund is its classification as an equity-oriented fund for tax purposes. This makes it an attractive option for investors in higher tax brackets. The tax treatment aligns with that of equity funds, where Long-Term Capital Gains (LTCG) tax of 12.5% applies to gains exceeding Rs 1.25 lakh in a financial year. This favorable tax structure enhances the overall return potential for investors seeking tax-efficient returns.

The fund is particularly suited for investors looking for short- to medium-term investment horizons, especially those who prefer a low-risk profile. The scheme’s riskometer categorizes it as a “low” risk investment, making it a prudent choice for conservative investors who are wary of market volatility but still wish to benefit from equity market returns.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.