BNP Paribas Enhanced Arbitrage Fund is better than the industry liquid, liquid plus, short term and Accrual Funds.
· As we all know the yields have dropped drastically and clients have made money in the recent times from the debt products . The important question to be answered is what from NOW ON .
· If one decided to invest further in any short term or accrual fund in the industry he/she should consider the following.
SHORT TERM FUNDS
1. The YTM spread between liquid and short term fund today stand at approx. 20 – 40 bps.
2. As a investor net of expense ( 1.25 industry average ) one would be minimum 100 bps below liquid fund return in their short term or accrual funds from day 1
3. With the recent action by RBI post demonetarization CRR hike and MSS bond issue has taken away the large hope of serial rate cuts in the short term.
4. In the current scenario if one decides to enter into a product with average modified duration at 2.5 years , even with the view of 50 Bps rate cut in the next 6 months the return of short term funds might just match up to liquid fund returns.
5. With customer expectation for superior returns like the recent past , it would not be the right thing to do by investing in short term funds in the industry
6. Moving to Accrual funds with credit portfolio, we are not saying credit default might happen but beware that if yield hardens on a 3 yr AAA rated paper from here it would be more on the AA- and A+ paper. This means low credit portfolio might have high negative MTM impact in case of yield hardening.
7. With global scenario not being so conducive and domestic events not giving 1 year direction for duration based products the best suitable product in the so volatile times like this is BNP Paribas Enhanced Arbitrage Fund
1. No duration risk in the portfolio
2. No credit risk
3. Equity taxation which saves you 15% on your return
4. Even on a liquid fund matching performance scenario the net return difference could 15 % higher because of Equity Taxation.
5. Tax free dividend makes it even more a efficient product
6. Potential ALPHA generation through long short strategy
Fund Performance Comparison:
| Report as on January 13, 2017 | |||||||||
|
| Simple Annualised % (Point to Point) |
| |||||||
| Scheme Name | 1 Day | Rank as per 1 Day | 3 Days | Rank as per 3 Days | 1 Week | Rank as per 1 Week | YTD | Rank YTD | Since Inception (P2P)-C |
| Birla SL Enhanced Arbitrage Fund(G) | 12.6982 | 8 | 9.3792 | 9 | 4.8820 | 9 | 2.2815 | 8 | 7.0829 |
| BNP Paribas Enhanced Arbitrage Fund-Reg(G) | 39.9582 | 1 | 21.8367 | 1 | 17.6844 | 1 | 11.8388 | 1 | 14.6948 |
| Edelweiss Arbitrage Fund-Reg(G) | 23.0533 | 3 | 8.7409 | 10 | 5.2887 | 6 | 2.3765 | 7 | 7.5688 |
| HDFC Arbitrage-WP(G) | 13.1342 | 7 | 9.7664 | 8 | 4.5591 | 11 | 2.6595 | 5 | 7.4819 |
| ICICI Pru Equity-Arbitrage Fund(G) | 7.8167 | 15 | 7.5850 | 12 | 3.4730 | 13 | 1.5156 | 12 | 7.9136 |
| IDFC Arbitrage Fund-Reg(G) | 9.0982 | 12 | 7.2125 | 14 | 4.7433 | 10 | 2.7074 | 4 | 7.3739 |
| JM Arbitrage Adv Fund(G) | 7.9273 | 14 | 6.8866 | 15 | 3.3748 | 14 | 0.4638 | 16 | 7.6365 |
| Kotak Equity Arbitrage Scheme(G) | 4.8937 | 16 | 5.0544 | 17 | 2.0302 | 17 | 0.9210 | 15 | 7.7056 |
| Reliance Arbitrage Advantage Fund(G) | 11.6770 | 10 | 7.7169 | 11 | 2.3294 | 15 | 1.2486 | 13 | 8.4186 |
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1. DSP BlackRock Tax Saver Fund
2. Invesco India Tax Plan
3. Tata India Tax Savings Fund
4. BNP Paribas Long Term Equity Fund
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