Kotak Arbitrage Fund

Derivatives

India Debt Liquid Market

Liquid

Others

Aggressive growth Investor Profile

Investor Profile

1–7 yearsInvestment Horizon

HNI, UHNI, Retail Investor, Mass AffluentTarget Segments

SEBI registered equity mutual fund suitable for all investor categoriesRegulatory Fit

Kotak Equity Arbitrage Fund Growth invests in alternative assets for non-traditional growth opportunities.

What This Strategy Does

Kotak Arbitrage Reg Gr is an equity arbitrage fund which captures India's ₹1.5 trillion equity arbitrage opportunity through cash-and-carry strategies, deploying capital across financials, industrials, and materials to achieve cycle-agnostic compounding.

CW Expert Research Notes

Consistent Outperformance

The fund has demonstrated resilient benchmark-relative behavior, outperforming in all 12 years since inception, reflecting a robust investment process and disciplined execution.

Arbitrage Expertise

The fund's differentiated approach leverages expertise in arbitrage strategies, expressed through a cash-heavy portfolio with modest equity and bond exposures, mitigating market risk.

Defensive Diversifier

With a low volatility profile and positive Sharpe ratio, the fund can serve as a defensive diversifier, potentially benefiting from structural trends in India's growing capital markets.

Performance and Risk Analysis

Historical returns, volatility patterns, and how this fund has performed relative to its benchmark.

Fund Performance

0.0% AnnuallyAlpha

+5.9% vs +9.9% benchmarkSince Inception

+6.9% vs +6.3% benchmark3Y Annualized

+6.3% vs +6.5% benchmark5Y Annualized

Kotak Arbitrage Fund

Benchmark Index

Benchmark Performance Comparison

Kotak Equity Arbitrage Fund

FD Returns

Risk Profile

Standard Deviation0.5%

Sharpe Ratio-0.23

Detailed Risks

Market Risk

Prolonged economic slowdown could reduce arbitrage opportunities, mitigated by diversified exposures.

Liquidity Risk

High mid-cap allocation risks liquidity stress during volatility spikes, mitigated by large-cap buffer.

Concentration Risk

Concentrated mid-cap exposure risks earnings disappointments or sector headwinds, mitigated by diversification.

Specific Strategy Risk

Regulatory changes impacting arbitrage strategies could disrupt execution, mitigated by monitoring.

Strategy Details

A closer look at the investment thesis, portfolio construction, and current holdings.

Core Investment Theme

Captures pricing inefficiencies between cash and derivative markets. This fund employs arbitrage strategies to generate low-risk returns from temporary mispricing across related securities. The impact is a steady income stream with minimal correlation to broader equity markets, providing diversification benefits.

Broader Market View

Market Outlook

Equity markets appear poised for recovery after the recent correction, supported by resilient consumption trends and an anticipated earnings normalization cycle. As economic activity revives, sectors like consumer discretionary, financials and industrials stand to benefit from rising domestic demand and a potential capex revival, although margin pressures remain a key risk.

Why This Strategy is Attractive Now

This strategy's balanced exposure across consumer cyclicals, defensives, financials and technology appears well-aligned with the current environment. The portfolio's diversification across around 70 holdings, including market leaders, moderate beta and flexibility to adapt could allow for risk-adjusted participation in the anticipated recovery while mitigating downside risks.

Investment Style & Process

Investment Style

The portfolio exhibits characteristics of a Quality Growth strategy, emphasizing companies with durable competitive advantages, robust profitability, and consistent earnings growth across market cycles.

Why it Makes Sense

In the current environment of moderating economic growth and elevated uncertainty, a Quality Growth approach focused on market-leading franchises with pricing power and resilient business models could offer a compelling risk-adjusted return profile.

High-Level Investment Process

Sourcing: The strategy appears to source investment candidates from a broad universe of quality companies across market capitalizations and sectors, with a preference for those demonstrating sustainable competitive advantages, strong balance sheets, and attractive growth runways. Selection: The selection process suggests an emphasis on fundamental research to identify companies with durable growth drivers, capable management teams, and reasonable valuations relative to long-term earnings prospects. Construction: Portfolio construction is consistent with a focus on risk management through diversification across sectors and individual positions, while allowing higher allocations to the strategy's highest-conviction holdings.

Portfolio Holdings Overview

SectoralAllocation

Utilities5.08%

Services10.9%

Technology1.6%

Consumers16.48%

Energy & Infra7.59%

Financial Services37.25%

Capital Goods21.11%

Geographic Allocation

Domestic100%

Top Stock Holdings

CompanySectorAllocation

Cash Offset For DerivativesUtilities69.19%

Kotak Money Market Dir GrUtilities11.64%

Kotak Savings Fund Dir GrUtilities5.80%

HDFC Bank LtdFinancial Services3.99%

Kotak Liquid Dir GrUtilities3.45%

ICICI Bank LtdFinancial Services2.94%

Kotak Low Duration Dir GrUtilities2.72%

Axis Bank LtdFinancial Services2.15%

Kotak Mahindra Bank LtdFinancial Services2.14%

HDFC Bank Ltd.Utilities2.03%

Fund House Management

The asset management company’s track record, AUM scale, and fund manager credentials.

Fund Manager Track Record

Hiten Shah

Mr. Hiten Shah has experience of 19 years. Manages 38 funds at Kotak Mahindra Asset Management Co Ltd with an AUM of approximately ₹1,10,024 Cr Holds a B.com degree.

19 years

Combined Team Experience

₹ 1,10,024 Cr

Assets Under Management

CW Expert Take

Kotak brings banking-grade risk assessment to fund management. Their strength is in identifying mispriced opportunities while maintaining portfolio quality. The equity teams focus on sustainable business models, while their debt strategies emphasize credit selection and liquidity management—reflecting the parent group's risk culture.

Firm Overview

Total AUM₹5,80,249.31 Cr

Investment Philosophy & Approach

Disciplined Approach

Kotak's investment philosophy emphasizes a disciplined, research-driven approach to portfolio construction.

Risk Management

Robust risk management practices are integral to Kotak's investment decision-making framework.

Long-Term Focus

Kotak maintains a long-term capital allocation mindset, prioritizing sustainable value creation.

Operational & Regulatory Details

What it costs to invest, transaction mechanics, and regulatory disclosures you should know.

Costs and Fees

Total Expense Ratio (TER)0.99%

Exit Load0.25

Regulatory & Tax Information

INF174K01302

ISIN

DailyDealing Frequency

LTCG | >1Year 12.5%% on gain above 1.25 Lakh

STCG | <1Year 20%%

Tax Implications (India)