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Why are HNIs choosing absolute return AIFs over debt funds?Nalin Moniz, Edelweiss Asset Management,

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Key Take-Aways
  • With absolute return equity funds, about 90 to 95 percent of the underlying base is traditional fixed income. The balance 5 to 10 percent involves equity trading or arbitrage opportunities.

  • The opportunities are created by fund managers taking calls on specific stocks moving in certain directions. They do not take duration or credit calls.

  • Absolute return AIFs give fixed income investors different risk exposures and is complementary to what investors will get from a traditional debt mutual fund.

  • For many investors, benchmark for a low risk absolute return strategy is between 1.5 to 2 percent more than an arbitrage fund on a post-tax, post-fee basis. In current market, that works to about 7.5 to 8 percent.

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