Nippon India Mutual Fund has launched the Income Plus Arbitrage Omni Fund of Fund, an open-ended hybrid fund of funds scheme that invests in domestic active and passive debt-oriented and arbitrage mutual fund schemes. According to reports from The Hindu BusinessLine, the scheme is structured to maintain exposure to debt mutual fund schemes, debt and money market instruments, including triparty repo on government securities, treasury bills, cash and cash equivalents, below 65 per cent at all times. The fund will invest 95-100% of its assets in units of domestic arbitrage schemes and active and passive debt-oriented mutual fund schemes, while 0-5% may be invested in debt and money market instruments. This strategic allocation allows the fund to qualify for favorable tax treatment under the Income Tax Act, 2025.
The fund's key selling point lies in its tax treatment under the Income Tax Act, 2025. As reported by The Hindu BusinessLine, a fund of funds investing less than 65% in debt instruments and held for more than 24 months qualifies for long-term capital gains tax at 12.5%, compared to the slab rate applicable to specified mutual funds. The fund house illustrates this advantage through a scenario where an investment of ₹1,00,000 at 8% CAGR over 24 months results in a post-tax value of ₹1,14,560 under this fund versus ₹1,11,648 under a specified mutual fund taxed at 30%, translating to a post-tax CAGR of 7.03% against 5.66%. For holding periods up to 24 months, taxation follows the investor's applicable slab rate.
The fund's benchmark allocation consists of 60% CRISIL Short Term Bond Index and 40% Nifty 50 Arbitrage Index, providing a balanced approach to debt and arbitrage opportunities. According to the company press release, the fund will invest in a combination of active and passive debt-oriented mutual fund schemes, offering investors exposure to both traditional debt instruments and arbitrage strategies. The fund will invest a minimum of 35% in arbitrage funds while the corpus in active debt funds, passive debt funds and money markets will be less than 65% at any point of time. Unlike debt or arbitrage funds where investors bear tax burden each time they switch between schemes, rebalancing within this fund of funds does not trigger a tax liability for investors, as the fund manager handles allocation internally. The fund is designed to provide investors with exposure to multiple debt and arbitrage strategies through a single investment, with the fund manager taking decisions on the selection and allocation across underlying schemes.
The NFO window runs from August 17 to August 31, 2026, providing investors with an early entry opportunity into this hybrid fund strategy. The fund is managed by Sushil Hari Prasad Budhia and Vikash Agarwal, both Senior fund managers in fixed income, and offers ₹500 minimum investment with ₹100 top-up facility, making it accessible to a wider investor base. The scheme will be available under Direct and Regular plans, with Growth and IDCW options, and will not have an exit load. Nippon India Mutual Fund said the fund is aimed at investors with a minimum two-year investment horizon who are seeking relatively better risk-adjusted returns, as well as investors who prefer a fund manager-led approach to selecting and allocating between active, passive debt and arbitrage strategies. This investment avenue is ideal for investors who have a low appetite for interest rate volatility and seeking accrual returns with a holding period of two to three years.
