Arudha – Bandhan AMC’s new SIF vertical – has launched its first product: Arudha Hybrid Long Short Fund.
Unlike some peers who have chosen to position their hybrid long-shorts as BAF+ solutions, Bandhan AMC has chosen to position its hybrid long-short as an arbitrage+ solution aimed at conservative HNIs.
A minimum of 35% will be invested in arbitrage while upto65% will be invested in a mix of corporate bonds (largely AAA with a small portion of A/AA) and G-Secs in the 1-4 yr maturity bracket.
This fund strategy aims to deliver debt-kind of returns but with much lower volatility.
Back testing of Arudha’s model suggests upto 80 bps higher return compared to fixed income solutions at significantly lower levels of volatility.
Income + Arbitrage mutual funds adopt a similar strategy except that they are constrained by lower security specific limits than SIF. More importantly, since SIFs are interval funds and have to be listed, investors can avail 12.5% LTCG with a holding period of only 1 year as opposed to 2 years for income + arbitrage mutual funds.
Equity-like taxation, debt-like returns and almost arbitrage like volatility makes the Arudha Hybrid Long Short a strong competitor to fixed deposits and other traditional fixed income solutions.
Hybrid long-shorts modeled as arbitrage+ solutions are the best foot forward yet from the AMC industry to take on fixed deposits, especially in the HNI segment. This is a product that distributors should keenly consider taking to every fixed deposit focused HNI client.