Axis Mutual Fund has launched the Axis Income Plus Arbitrage Passive Fund of Funds, an open-ended hybrid scheme that seeks to combine the stability of fixed income instruments with the tax efficiency of equity arbitrage strategies. Designed for conservative investors—including corporates, high-net-worth individuals, and retail participants—the fund aims to deliver steady, post-tax optimised returns with minimal market volatility.
The newly launched fund invests in passive debt-oriented mutual funds and arbitrage funds, creating a diversified mix that balances income generation with low risk. The approach targets investors seeking a stable return profile over the medium term, aligning with the increasing demand for predictable yet efficient investment options. Axis Mutual Fund believes this strategy provides an alternative for investors who wish to avoid excessive equity exposure while still benefiting from market-linked opportunities.
According to the fund structure, 50–65% of the portfolio will be invested in passive debt-oriented schemes that follow a roll-down strategy—a mechanism designed to capture accrual income while managing interest rate risks. The remaining 35–50% will be deployed in arbitrage funds that engage in fully hedged equity positions, thereby limiting volatility and avoiding direct exposure to market fluctuations. This composition aims to produce returns comparable to traditional debt products while maintaining a degree of tax efficiency.
The fund’s performance will be measured against a composite benchmark index: 65% NIFTY Short Duration Debt Index and 35% Nifty 50 Arbitrage TRI. With T+2 redemption payouts and no exit load, the scheme offers liquidity and flexibility, catering to investors seeking short to medium-term solutions. Axis MF has highlighted that the scheme is intended to offer “stable accrual income with limited downside risk.”
However, questions around its tax treatment remain a point of discussion. Despite the fund’s positioning as tax-efficient, industry experts caution that it may not fully replicate the benefits of equity-oriented schemes. As a debt-oriented hybrid fund, capital gains from the scheme are subject to taxation at the investor’s applicable income tax slab rate, rather than the more favourable rates applied to pure equity or arbitrage funds. This has sparked debate about whether the scheme can truly deliver superior post-tax outcomes.
B. Gopkumar, Managing Director, Axis Mutual Fund, commented on the launch: “The fund offers a unique blend of stability, transparency, and tax efficiency. In a market where predictability and post-tax returns matter more than ever, this fund is designed to empower investors with a smarter way to approach fixed income investing.”
Ashish Gupta, Chief Investment Officer of Axis MF, added that the fund is timely given current conditions: “With the current market environment offering attractive accrual opportunities and investors increasingly seeking tax-efficient alternatives to traditional fixed income products, the Axis Income Plus Arbitrage Passive FOF can be a timely solution.”
Rise and rule of passive investing
The launch comes amid a surge in passive investing trends across India. In September 2025, passive mutual fund schemes—including index funds, ETFs, and fund-of-funds—recorded 2.1 million new folio additions, surpassing the 1.4 million seen in active equity funds for the first time. The sharp rise was driven by strong inflows into gold and silver ETFs, as investors sought safety amid geopolitical tensions and global market uncertainty.
With over 40% year-to-date returns from precious metals and concerns over active fund underperformance, passive funds have emerged as a preferred investment route for their lower costs, transparency, and consistency. However, analysts note that while passive funds eliminate fund manager risk, they cannot outperform benchmarks, avoid overvalued sectors, or capture early opportunities in emerging stocks.
Still, passive strategies—spanning both equity and fixed income categories—are increasingly being used as core portfolio anchors for stability and satellite allocations for tactical plays. The success of funds like the Axis Income Plus Arbitrage Passive FOF underscores how passive hybrids are reshaping modern investment portfolios, offering a middle path between risk and reliability.
Disclaimer: Business Today provides market and personal news for informational purposes only and should not be construed as investment advice. All mutual fund investments are subject to market risks. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.