Everything you need to know about Income plus Arbitrage Active FOF

A crucial part of letting your money make you money is to know and understand exactly where you are putting your money and having a clear understanding and expectations of your investment goals. In this blog we deep dive into a fund that invests in a variety of debt oriented mutual fund schemes of different AMCs through a single fund and could help you with tax benefit, easy switches, added stability and more.

The Axis Income plus Arbitrage Active FOF aims to solve the 3 S’s of investor dilemma. Namely -switch during cycle change, stability against equity downside and strain by taxes. The USP of the product revolves around addressing specific investor challenges including tax efficiency, all season proposition, better risk-return profile than traditional investments, and a lower volatility than hybrid funds.

Structure of Axis Income plus Arbitrage Active FOF
The Income plus Arbitrage Active FOF is structured such that up to 65% investments are in the underlying debt-oriented scheme, and balanced investment in arbitrage schemes. It invests in Debt and Arbitrage funds only, helping add potential stability to investors and equity like debt alongside equity like taxation. This allows investors with a holding period of at least two years benefit from a lower tax rate of 12.5% compared to the higher tax rate applied to debt mutual funds.

Salient Features of the fund

• Potential Tax Benefit: The primary tax benefit of this fund arises from its unique structure allowing it to be taxed as an equity-oriented fund for long-term capital gains after a holding period of two years. This can lead to a more tax-efficient way to generate returns compared to traditional debt funds, particularly for those with a longer investment horizon.
• Focus on High-Quality Investments: The fund aims to maintain a high-quality bias, focusing on schemes investing in AAA-rated securities and dynamically adjusting its allocation based on market conditions to optimize return.
• Dynamic allocation: The fund employs a dynamic allocation strategy by adjusting duration, credit, and cash based on the prevailing market environment and macroeconomic outlook, through change in exposure to underlying funds.
• Multi Fund house strategy: The fund will decide basis macro and market conditions best strategies to invest into, accordingly aims to allocate in best funds across fund houses.
• Low Expense Ratio: The cost of managing the fund is quite low: 0.06% for direct investments and 0.45% for regular investments (as of April 29, 2025).
• Quick Redemption Pay-out: You'll typically receive your money back within 2 working days after requesting a withdrawal (T+2).
• No Exit Fee: You won't be charged any fee when you decide to withdraw your money from the fund.

Why a multi-house strategy could be the right choice for you
Firstly, a multi-fund house strategy helps navigate the different market conditions by tapping into various investment styles and fund manager expertise. This approach aims to deliver the best possible outcomes across diverse economic landscapes, rather than being reliant on a single style or manager who might underperform in certain environments.

Secondly, by spreading investments across multiple fund houses, a multi-house strategy enhances diversification. This significant advantage can substantially cushion your portfolio against the negative effects of defaults or downgrades, particularly during challenging credit cycles.

Guiding criteria for fund selection

• Diversified Exposure to Top Debt Managers: The fund strategically invests primarily in the top ten. Debt AMCs, ensuring broad and balanced exposure to high-quality funds for enhanced diversification and performance.
• Comprehensive Underlying Scheme Coverage: The investment approach aims to cover the majority of underlying debt scheme investments, providing a wide representation of the debt market.
• Objective Fund Selection Process: Fund selection, including arbitrage schemes, is based on objective criteria like AUM size, low expenses, easy entry/exit, and strong performance history, ensuring an unbiased approach to fund management.

Why Income Plus Arbitrage FOF could be the right fit for you

1. If you want to increase your Tax efficiency: This fund is structured to try to offer more favourable tax treatment (12.5% after two years) compared to traditional debt funds.
2. If you want to invest with an all-weather approach: By combining debt and arbitrage, it aims to provide stability in volatile markets and potentially better risk-adjusted returns than only debt investments.
3. If you wish to diversify across experts: Investing across multiple top fund houses leverages different investment styles and expertise, aiming for better outcomes in various market conditions.
4. If you want a fund that focuses on high quality debt instruments: The fund prioritizes high-quality debt investments and dynamically adjusts its strategy based on market conditions to optimize returns.
5. If you want something that is low cost with easy access: It boasts a low expense ratio and offers quick redemption with no exit fees, making it a cost-effective and accessible investment option.

## Axis Income Plus Arbitrage Active FOF (erstwhile Axis Income Advantage Fund of Funds)
Disclaimers:
For individual nature of tax implications, investors are requested to consult their tax advisors before investing.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates, shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The material is prepared for general communication and should not be treated as a research report. The data used in this material is obtained by Axis AMC from the sources which it considers reliable. While utmost care has been exercised while preparing this document, Axis AMC does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.
Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.