MF industry leverage fund-of-fund route to create debt alternative

Fund houses adding arbitrage to existing debt FoFs to get the tax advantage

In the quest for a tax-efficient debt fund alternative, the mutual fund (MF) industry is knocking on the doors of Fund of Funds (FoF).

 

Currently, there are two FoFs that allocate a portion of their assets to arbitrage funds to improve tax efficiency. Two more additions will happen by March 3.

 

Kotak Mutual Fund was the first to introduce this approach by adjusting the asset allocation framework of its Kotak All Weather Debt FoF in October 2024, renaming it the Kotak Income Plus Arbitrage Fund.

 

Recently, Bandhan MF, Axis MF, and Aditya Birla Sun Life (ABSL) MF have followed