Old Bridge Mutual Fund launches new Arbitrage Fund: Low risk route for short term investors

Old Bridge Mutual Fund has announced the launch of its Old Bridge Arbitrage Fund, a low-risk, short-term investment option designed for investors seeking stable, tax-efficient income without taking on significant market volatility. The fund will leverage arbitrage opportunities between the equity spot and derivatives markets, as well as within the derivatives segment, to generate consistent returns while maintaining a fully hedged, market-neutral portfolio.

According to the fund house, the new scheme expands Old Bridge’s growing product suite and reflects its disciplined, research-driven approach to fund management. The fund’s riskometer classifies it as low risk, making it an attractive choice for investors with surplus funds who prefer capital stability over aggressive growth.

“At Old Bridge, we’ve always believed that consistency builds confidence. With the Arbitrage Fund, our goal is to offer investors a disciplined, market-neutral solution that combines low-risk return potential with the tax efficiency of an equity-oriented product,” said Ruchi Pandey, Chief Executive Officer, Old Bridge Mutual Fund.

Pandey added that as a young yet deeply research-focused fund house, Old Bridge remains committed to “doing simple things well” and designing products that reflect a long-term philosophy of trust and transparency.

Old Bridge’s portfolio

The launch follows the success of Old Bridge’s debut equity offering and underscores the company’s intent to broaden its product lineup with low-volatility investment solutions. The Old Bridge Arbitrage Fund will invest primarily in equity and equity derivatives, exploiting temporary price differences between the cash and futures markets.

The fund will avoid leveraged positions and dynamically adjust allocations across equity, derivatives, and debt instruments depending on prevailing market spreads. This ensures steady returns with minimal downside risk, aligning with the needs of investors looking to park funds for short to medium-term horizons while maintaining liquidity and benefitting from equity taxation.

According to the fund house, this product is designed for investors who:

Want to park funds for a short to medium duration (3 months to 1 year).

Seek low volatility and consistent returns.

Wish to benefit from the tax efficiency of equity-oriented schemes.

Understanding arbitrage funds

Arbitrage funds earn returns by taking advantage of price discrepancies between the cash (spot) and futures markets. They buy the stock in the cash market while simultaneously selling futures contracts on the same stock, capturing the price differential as profit. Since both transactions are executed simultaneously, the investment remains hedged and largely immune to market direction, making these funds suitable for conservative investors.

On average, arbitrage funds in India have delivered annual returns of around 7%, comparable to short-duration debt funds but with favourable equity taxation. Their performance depends on market volatility—higher volatility typically widens arbitrage spreads, increasing returns.

Top-performing arbitrage funds in 2025

Arbitrage funds have continued to deliver steady and tax-efficient performance, particularly amid volatile market conditions and elevated interest rates.

Short-term (1–3 months): Quant Arbitrage Fund, ITI Arbitrage Fund, and Franklin India Arbitrage Fund have led the pack, posting returns between 0.67% and 1.73%.

Medium-term (6–12 months): Motilal Oswal Arbitrage Fund, Quant Arbitrage Fund, and WhiteOak Capital Arbitrage Fund have maintained leadership, generating 3.2%–3.4% in six months and 7.3%–7.5% annually.

Long-term (3–5 years): Invesco India Arbitrage Fund and Kotak Arbitrage Fund have been consistent outperformers, delivering around 7.8% (3-year) and 6.5% (5-year) annualised returns.

Time Period                                  | Top 3 Arbitrage Funds       |
+———————————————-+—————————–+
| 1 Month Return (%)                           |                             |
|                                              | 1. Quant Arbitrage Fund – Direct Plan (0.67%) |
|                                              | 2. ITI Arbitrage Fund – Direct Plan (0.64%)   |
|                                              | 3. Franklin India Arbitrage Fund – Direct Plan (0.63%) |
+———————————————-+—————————–+
| 3 Month Return (%)                           |                             |
|                                              | 1. Quant Arbitrage Fund – Direct Plan (1.73%) |
|                                              | 2. Motilal Oswal Arbitrage Fund – Direct Plan (1.61%) |
|                                              | 3. WhiteOak Capital Arbitrage Fund – Direct Plan (1.59%) |
+———————————————-+—————————–+
| 6 Month Return (%)                           |                             |
|                                              | 1. Motilal Oswal Arbitrage Fund – Direct Plan (3.42%) |
|                                              | 2. Quant Arbitrage Fund – Direct Plan (3.35%)          |
|                                              | 3. WhiteOak Capital Arbitrage Fund – Direct Plan (3.21%) |
+———————————————-+—————————–+
| 1 Year Return (%)                            |                             |
|                                              | 1. WhiteOak Capital Arbitrage Fund – Direct Plan (7.46%) |
|                                              | 2. ITI Arbitrage Fund – Direct Plan (7.39%)              |
|                                              | 3. Tata Arbitrage Fund – Direct Plan (7.29%)             |
+———————————————-+—————————–+
| 3 Year Return (%)                            |                             |
|                                              | 1. Invesco India Arbitrage Fund – Direct Plan (7.85%) |
|                                              | 2. Kotak Arbitrage Fund – Direct Plan (7.84%)         |
|                                              | 3. Tata Arbitrage Fund – Direct Plan (7.79%)          |
+———————————————-+—————————–+
| 5 Year Return (%)                            |                             |
|                                              | 1. Invesco India Arbitrage Fund – Direct Plan (6.56%) |
|                                              | 2. Kotak Arbitrage Fund – Direct Plan (6.51%)         |
|                                              | 3. Edelweiss Arbitrage Fund – Direct Plan (6.47%)     |
+———————————————-+—————————–+

A growing space for low-risk investors

As market volatility continues to fluctuate and interest rates remain elevated, arbitrage funds are emerging as a preferred short-term vehicle for conservative investors. They offer stable returns, liquidity, and equity tax treatment, making them suitable for parking surplus funds or maintaining a low-risk allocation within diversified portfolios.

With the launch of the Old Bridge Arbitrage Fund, the fund house strengthens its foothold in this growing category—offering investors a balanced blend of safety, efficiency, and consistency.

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