NEW DELHI, Jan. 15 -- The calendar year 2020 was not good for arbitrage funds. Most of them recorded their worst monthly performance in May 2020, where they saw negative returns. The one-year category returns-average returns of all arbitrage funds-too, fell to 3.6% as of 1 January 2021, according to data from Value Research. In the past three and five years, these funds had an annualized return of 5.1% and 5.6%, respectively.
Arbitrage funds are suggested my many investment advisers as a replacement for liquid schemes for investors in the higher tax brackets. As arbitrage funds are classified as equity funds, they are tax-efficient for those in the higher tax brackets-20% or more.
Should investors stay away from them due to their recent p...