Best arbitrage mutual funds to invest in 2020

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3.Downside risk:We have considered only the negative returns given by the mutual fund scheme for this measure.

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[Risk Free Rate + Beta of the MF Scheme * (Average return of the index – Risk Free Rate

2.Consistency in the last three years:Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.

i) When H equals 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.

If you are new to mutual funds, here is how arbitrage funds work. These mutual fund schemes look to exploit the arbitrage opportunities (or price difference) available between the cash and the future market. Essentially, these schemes look for the price difference between the spot market and derivatives market to earn risk-free returns. The price mismatching would be more in a volatile market. So, volatility works in favour of arbitrage mutual fund schemes.

It is not wise to invest in arbitrage schemes with a very short investment horizon. They are ideal to invest for at least a year, but you can also invest in them if you have a horizon of at least six months.

(Disclaimer: past performance is no guarantee for future performance.)

After the recent troubles in the debt mutual fund space, many mutual fund advisors have started recommending arbitrage funds to their clients to park money needed for their short-term needs. These advisors believe that the safety of these schemes assure peace of mind to their clients at this point.

1.Mean rolling returns:Rolled daily for the last three years.

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Best arbitrage mutual funds to invest in 2020

here is the update on our recommended arbitragemutual fundsfor September. All the recommended schemes have managed to retain their spots in the list this month. You may continue or start your investments in these schemes.ii) When H is less than 0.5,white collar lootBefore we proceed,Coleman & Co. Ltd. All rights reserved. For reprint rights:Times Syndication Service

Best arbitrage mutual funds to invest in 2020