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Kolkata, April 27

PRUDENTIAL ICICI MF has launched a fund that uses arbitrage opportunities arising in the equity and equity derivatives markets.

Pru ICICI Blended Plan seeks to strike a mix between equity, debt, money market instruments and derivatives even as it aims at capital appreciation and income distribution. The idea is to generate risk-adjusted returns for unit holders.

The scheme combines allocations to short-term debt and equity arbitrage positions, depending on market conditions, with a view to provide returns in the form of accrual income from debt allocation and cost of carry from arbitrage positions, a press note issued by the mutual fund has mentioned.

Returns are expected to materialise without assuming significant mark-to-market risks on investments. The fund offers two plans, both of which will pursue a spot-future arbitrage strategy. Plan A will try to maintain 50 per cent exposure to fully hedged equity, up to 49 per cent in money market securities and a small percentage in equity, adequate to cover the 51 per cent required exposure. Plan B will invest between 51-100 per cent in money market instruments and the balance in fully hedged equity.

The plans, the press note said, will be available for subscription (after the closure of the IPO) on an ongoing basis during business days falling between 17th and 22nd of every month. An investor may redeem on any business day with an exit load of 0.5 per cent applicable only on exit within 30 days from the date of allotment. Under both plans, investors have a choice between growth and dividend options.

(This article was published in the Business Line print edition dated April 28, 2005)
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