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Thursday, January 19, 2017

BNP Paribas Enhanced Arbitrage Fund


BNP Paribas Enhanced Arbitrage Fund is better than the industry liquid, liquid plus, short term and Accrual Funds.

 

·         As we all know the yields have dropped drastically and clients have made money in the recent times from the debt products . The important question to be answered is what from NOW ON .

·         If one decided to invest further in any short term or accrual fund in the industry he/she should consider the following.

 

SHORT TERM FUNDS

 

1.       The YTM spread between liquid and short term fund today stand at approx. 20 – 40 bps.

 

2.       As a investor net of expense ( 1.25 industry average ) one would be minimum 100 bps below liquid fund return in their short term or accrual funds from day 1

 

3.       With the recent action by RBI post demonetarization CRR hike and MSS bond issue has taken away the large hope of serial rate cuts in the short term.

 

4.       In the current scenario if one decides to enter into a product with  average modified duration at 2.5 years , even with the view of 50 Bps rate cut in the next 6 months the return of short term funds might just match up to liquid fund returns.

 

5.       With customer expectation for superior returns like the recent past , it would not be the right thing to do by investing in short term funds in the industry

 

6.       Moving to Accrual funds with credit portfolio, we are not saying credit default might happen but beware that if yield hardens on a 3 yr AAA rated paper from here it would be more on the AA- and A+ paper. This means low credit portfolio might have high negative MTM impact in case of yield hardening.

 

7.       With global scenario not being so conducive and domestic events not giving 1 year direction for duration based products the best suitable product in the so volatile times like this is BNP Paribas Enhanced Arbitrage Fund

 

 

1.       No duration risk in the portfolio

2.       No credit risk

3.       Equity taxation which saves you 15% on your return

4.       Even on a liquid fund matching performance scenario the net return difference could 15 % higher because of Equity Taxation.

5.       Tax free dividend makes it even more a efficient product

6.       Potential ALPHA generation through long short strategy

 

Fund Performance Comparison:

 

Report as on January 13, 2017

 

Simple Annualised % (Point to Point)

 

Scheme Name

1 Day

Rank as per 1 Day

3 Days

Rank as per 3 Days

1 Week

Rank as per 1 Week

YTD

Rank YTD

Since Inception (P2P)-C

Birla SL Enhanced Arbitrage Fund(G)

12.6982

8

9.3792

9

4.8820

9

2.2815

8

7.0829

BNP Paribas Enhanced Arbitrage Fund-Reg(G)

39.9582

1

21.8367

1

17.6844

1

11.8388

1

14.6948

Edelweiss Arbitrage Fund-Reg(G)

23.0533

3

8.7409

10

5.2887

6

2.3765

7

7.5688

HDFC Arbitrage-WP(G)

13.1342

7

9.7664

8

4.5591

11

2.6595

5

7.4819

ICICI Pru Equity-Arbitrage Fund(G)

7.8167

15

7.5850

12

3.4730

13

1.5156

12

7.9136

IDFC Arbitrage Fund-Reg(G)

9.0982

12

7.2125

14

4.7433

10

2.7074

4

7.3739

JM Arbitrage Adv Fund(G)

7.9273

14

6.8866

15

3.3748

14

0.4638

16

7.6365

Kotak Equity Arbitrage Scheme(G)

4.8937

16

5.0544

17

2.0302

17

0.9210

15

7.7056

Reliance Arbitrage Advantage Fund(G)

11.6770

10

7.7169

11

2.3294

15

1.2486

13

8.4186






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