Nippon India Mutual Fund launches an income plus arbitrage fund of funds; details here

Nippon India Mutual Fund, on 17 August, announced a new fund offer suited for investing in the current volatile market environment. The Nippon India Income Plus Arbitrage Omni Fund of Fund (FoF) offers risk-adjusted returns, supported by lower volatility and enhanced tax efficiency. The NFO opened for subscription on 17 August 2026 and will close on 31 August 2026.

As per the media statement, the Nippon India Income Plus Arbitrage Omni Fund of Fund will invest almost the entire corpus (95% to 100%) in a combination of arbitrage mutual funds, active and passive debt mutual funds and an optional small proportion of a maximum 5% in debt and money market instruments.

The new fund offers a minimum of 35% in arbitrage funds, while the corpus in active debt funds, passive debt funds and money markets will be less than 65% at any point in time.

Tax-efficient fund

The nature and composition of the Nippon India Income Plus Arbitrage Omni Fund of Fund make it tax-efficient.

Since the fund invests less than 65%, the structure also makes this a tax-efficient solution for investors with a minimum investment horizon of two years.

If the units are held for more than 24 months, the gains are taxed at 12.5% as long-term capital gains, while for a holding period of up to 24 months, taxation is as per the investor’s applicable slab rate.

This makes the fund of funds particularly relevant for investors looking at a two-year or longer investment horizon.

Apart from tax efficiency, the Nippon India Income Plus Arbitrage Omni Fund of Fund offers a host of other advantages when compared with pure-play debt and arbitrage funds.

While debt-oriented funds primarily invest in debt and money market instruments, and arbitrage funds follow an arbitrage strategy through hedged equity positions, this upcoming NFO brings this combination within a single portfolio.

The fund manager takes the call on the underlying scheme selection and allocation, giving investors access to multiple strategies through one investment solution.

Investors can access multiple underlying strategies without having to switch between schemes themselves or bear the tax impact of such switches.

The fund manager can rebalance the underlying schemes within the fund of funds as required.

The fund also aims to offer relatively better returns, since the debt portion generates better risk-adjusted returns, while the arbitrage component captures equity market spreads.

This investment avenue is ideal for investors with a low appetite for interest rate volatility, seeking accrual returns, and holding for two to three years.

Disclaimer: This article is based on a media statement by Nippon India Mutual Fund. It is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.