Everything You Need to Know About Axis Income Plus Arbitrage Passive FoF

Investors are constantly on the lookout for innovative investment products that provide greater risk-adjusted returns and tax efficiency. Axis Income Plus Arbitrage Passive FoF can be a possible solution for both these goals.

This FoF is a hybrid product that comprises a fixed-income component as well as an arbitrage component.

Here’s everything you need to know about Axis Income Plus Arbitrage Passive FoF to help you make an informed investing decision.

What is Income Plus Arbitrage Passive FoF?
An Income Plus Arbitrage Passive FoF is primarily a fund of funds. The FoF invests 35% -50% of its fund corpus in arbitrage opportunities, and 50%-65% in fixed-income products, such as short to medium-duration bond funds.

The FoF provides a diversified solution with complete portfolio transparency and high predictability.

As the underlying debt scheme of the FoF is passive and invests in publicly available index funds, investors have complete visibility on their investments. Further, as the fund invests in fixed-income and arbitrage opportunities, investors can also have higher certainty about the potential returns of their investment.

Features of the Fund

Axis Income Plus Arbitrage Passive FoF comes with the following features:
• Unique Structure – The FoF will invest 50- 65% of its corpus in debt-oriented mutual fund schemes. The current focus of the FoF will be on short to medium-duration strategies. The rest of the fund corpus (35%-50%) will be invested in arbitrage funds without any directional calls.
• Low Risk – The FoF has been categorised as “Low to Moderate Risk” according to the scheme riskometer. This is because both arbitrage exposure and high-quality fixed income products have a lower risk profile.
• High Liquidity – The FoF will not charge any type of exit load. Investors will be able to liquidate their investments in T+2 days.

Benefits of the Fund

There are numerous benefits of investing in the Axis Income Plus Arbitrage Passive FoF.
• Scope for Relatively Stable Returns – The FoF aims to deliver predictable returns to investor. This is possible because of the structure of the fund, wherein underlying debt funds, invests a majority of its fund corpus in high-quality government and corporate bonds with a low credit risk. Further, the rest of the fund corpus is invested in arbitrage opportunities, which provide relatively additional stability without taking any directional calls.
• Tax Efficiency –If the investment is held for a period of over 24 months, investors will be taxed at 12.5%. Otherwise, if the investment is held for less than 24 months, then the applicable income tax slab rate will apply.
• High Quality – The FoF will predominantly invest in SOV/AAA-rated products, which are fixed-income products of high quality. The fund manager will choose corporate bonds which are issued by reliable companies in the financial services sector which have a strong outlook.

Who can Invest?
• Investors in a High Tax Bracket – As mentioned above, if an investor invests in the FoF for a period of more than 24 months, the returns will be taxed at a rate of 12.5%. This rate of taxation is considerably lower than the tax rate for investors who are part of the highest income tax bracket. Hence, such investors can benefit from this investment product that attracts a tax rate of 12.5% instead of the applicable income tax slab rate.
• Investors Looking for Relatively Stable Returns – As mentioned, the FoF will invest in high-quality fixed income funds along with arbitrage opportunities. These types of funds provide relatively stable returns along with lower risk.

Wrapping Up
Axis Income Plus Arbitrage Passive FoF is suitable for investors looking for a tax-efficient solution with relatively stable returns. This FoF offered by Axis Mutual Fund is the first investment product of its kind in the Indian market. It is a passive fund which offers a lower expense ratio and can act as an anchor as part of a well-balanced investment portfolio.

Statutory Details: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

This article 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 AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

Views and opinions contained herein are for information purposes only and should not be construed as investment advice/ recommendation to any party or solicitation to buy, sale or hold any security or to adopt any investment strategy. It 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. Axis MF/AMC is not guaranteeing/assuring any returns on investments. The recipient should exercise due caution and/ or seek professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein.

The product labelling assigned during the New Fund Offer is based on internal assessment of the Scheme Characteristics or model portfolio and the same may vary post NFO when actual investments are made.
Investors shall be bearing the recurring expenses of the scheme, in addition to the expenses of other schemes in which the Fund of Funds Scheme makes investments.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.