How Axis Income Plus Arbitrage Passive FoF may be Built for Consistency

Whether it’s cricket, career, or life in general, consistency of performance is the most preferred quality for the long term. Axis Income Plus Arbitrage Passive FoF, a unique product in the Indian market aims to offer this consistency in your investments too.

Want to know more? Read on.

What is Axis Income Plus Arbitrage Passive FoF?

The Axis Income Plus Arbitrage Passive FoF is a fund of funds, which means that it’s a mutual fund scheme that invests in other mutual fund schemes. It invests 35%-50% of its corpus in arbitrage opportunities, and the other 50%-65% is invested in debt oriented mutual fund schemes.

The underlying debt schemes will predominantly invest in SOV/AAA-rated assets, which will include corporate bonds issued by financial service sector companies (including NBFCs) and SDLs.

The unique structure of the fund allows it to benefit from equity-like taxation, which translates to 12.5% if the investment is held for a period of more than 24 months. Further, the investment strategy of the FoF is such that the performance has the scope of being relatively consistent. This is because the returns from arbitrage exposure are usually steady as no directional calls are made. Further, The FoF will invest in passive fixed income funds following rolldown strategy that can provide relatively consistent returns when held to maturity.

The overall return profile may be higher than other similar fixed-income products due to significantly higher tax efficiency of the FoF.

Why Axis Income Plus Arbitrage Passive FoF?

• Tax efficient: Long Term Capital Gains @12.5%
• High Liquidity – Redemption payout on T+2 basis, no exit load
• Three-Year AAA corporate bonds/SDLs spreads – Spreads are higher versus the historic averages.
• No tax impact on rebalancing of the underlying schemes
• Aims for stable returns corresponding to the returns of the underlying target maturity index

Who may invest?
There are many reasons to invest in this FoF, such as tax efficiency, diversification, relatively low risk, and potentially stable returns. Here are some of the types of investors who are likely to benefit from this investment:
• Investors in High Tax Bracket - Individuals in higher income tax brackets often face reduced post-tax returns on traditional fixed-income investments, as these are taxed at the investor’s marginal slab rate. In contrast, this Income Plus Arbitrage Passive FoF is taxed at only 12.5%, as long-term capital gains (after 24 months). This structure allows investors to enhance post-tax returns while maintaining a conservative risk profile.
• Investors Looking for Consistent Performance – The product can be suitable for investors who are looking for relatively stable returns without excess risk. Since the FoF invests in passive fixed income rolldown strategies along with arbitrage opportunities,returns are likely to be less volatile over the rolldown period. The FoF can also function as a stable anchor in a well-balanced portfolio with other higher risk investments.

Wrapping Up
Consistency makes life smoother and more certain. Axis Income Plus Arbitrage Passive FoF provides a unique opportunity to investors to gain from potentially stable returns and high tax efficiency. With the current macroeconomic scenario being favourable for the FoF, this offering can be a wise addition to complement your 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.