Getting around 6% in regular arbitrage funds. Should I move Rs 15L to an Arbitrage-Plus SIF for better returns?

Moving to an Arbitrage-Plus SIF is about accepting a slight bump in volatility for a potential 1 to 2% increase in your overall returns. Traditional arbitrage funds are great for safety but they typically cap out around 6% returns. The new Hybrid Long-Short SIFs give fund managers a much wider mandate to generate extra alpha.

These funds can take up to a 25% exposure in derivatives which allows for more sophisticated hedging strategies. If you want slightly better returns than a plain vanilla arbitrage fund, you map your need to an arbitrage-plus SIF. These specific schemes are designed to take just a little bit more risk than a standard arbitrage fund.

In exchange for that extra risk, you are aiming for that extra 1 or 2% alpha in performance. The entry amount is strictly minimum Rs 10L per PAN within a single fund house. Since you have Rs 15 Lakhs, you easily clear that hurdle.

For a 2-year time horizon, you need to be very strict about the risk profile you choose. Look exclusively at SIF schemes that have lower risks. These lower-risk funds prioritize capital protection and are perfectly aligned with an 18 to 24 month holding period.

If you hold the fund for more than 12 months, your gains fall under the 12.5% LTCG bracket. Just be careful if you need to pull the money out before a year. Because the category is less than a year old, short-term tax rules depend entirely on the specific fund's internal structure.

Some might tax you at 20% while others will use your regular income slab rate.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.