Equity Arbitrage Funds Gain Traction for Low Risk, Stability, and Tax Efficiency

Equity arbitrage funds are becoming more popular among investors because they offer low risk and stable returns.

These funds make money by taking advantage of small price differences between the stock market and the derivatives market.

They are also tax-efficient, especially for people who pay higher taxes.

For example, the Kotak Equity Arbitrage Fund made about 7.5% in returns after expenses in the fiscal year 2025.

However, a lot of that money went to the government as taxes and other fees.

Despite this, investors still find these funds attractive because they offer better returns after taxes compared to some fixed-income options.

In November 2025, these funds saw a lot of new money coming in, showing that investors are really interested in them.

Experts say these funds are a good place to park money for short to medium terms, but they are not a complete replacement for all types of debt investments.