Kolkata, June 6
PRINCIPAL MF has lined up an interval fund to tap arbitrage opportunities. The proposed fund will have two plans, one focused on equity and the other on debt.
The offer document placed with SEBI has underlined the following special risk factors:
The offer document has also specifically mentioned that trading volumes, transfer procedures, and settlement periods may well be limiting factors for the scheme.
When very few opportunities are available, or none at all, allocation to equity and equity-related instruments and equity-based derivatives (index futures, stock futures, etc.,) can go up to 75 per cent.
Also, investment in money market and debt instruments can be in the 25-100 per cent range. Unit holders will be given the choice of two options - growth and dividend - with same portfolios. The fund manager will essentially try to identify opportunities that exist between the cash and derivatives markets. Under the debt plan, the exposure to equity and equity-related instruments will be capped at 49 per cent.
Under the equity plan, the contribution of equity-based arbitrage can go up to 75 per cent.