#InvescoMutualFund #NFO #InvescoMFIncomePlusActiveFund #InvescoMFFOF #FOF #TaxEfficientStrategy
Chandigarh: Invesco Mutual Fund has announced the launch of a new investment product—the Invesco India Income Plus Arbitrage Active Fund of Fund, a hybrid offering that seeks to provide investors with a low-risk, tax-efficient income solution by combining the stability of debt investments with the opportunities available in equity arbitrage.
The fund is structured as an open-ended Fund of Fund (FoF), meaning it will invest primarily in other Invesco mutual fund schemes, rather than holding securities directly. The New Fund Offer (NFO) is currently open and will close on July 16, 2025.
Investment Strategy and Allocation
This unique fund will allocate approximately 60–65% of its portfolio to debt-oriented schemes, with a significant portion expected to be parked in the Invesco India Debt Fund. The debt allocation will focus on AAA-rated corporate bonds and sovereign government securities, with maturities ranging between 2 to 15 years, aiming to provide capital safety and regular income.
The remaining 35–40% of the portfolio will be directed towards the Invesco India Arbitrage Fund, which implements fully hedged arbitrage strategies. These typically involve exploiting price differences between the cash and futures markets of the same equity, resulting in relatively low-risk, market-neutral returns.
What makes the fund stand out is its active management and dynamic asset allocation model. The portfolio will be constantly reviewed and rebalanced based on prevailing market trends, interest rate outlooks, liquidity conditions, and arbitrage opportunities. This flexibility helps mitigate market volatility and optimize returns across varying market cycles.
Tax-Efficiency as a Key Advantage
One of the fund’s most appealing features is its favorable tax treatment. As a Fund of Fund investing in both debt and equity arbitrage schemes, the tax implications are more aligned with debt funds. However, unlike traditional debt funds where returns are taxed at the investor’s applicable income slab rate if held for less than three years, this scheme aims for longer holding periods.
Gains from investments held for over 24 months will be taxed at a long-term capital gains (LTCG) rate of 12.5% (excluding surcharge and cess), which is more attractive than the standard debt mutual fund taxation introduced in 2023. This makes the fund particularly suitable for conservative investors seeking a more tax-efficient income stream than fixed deposits or standard debt funds.
Expert Views and Industry Insight
Vikas Garg, Head of Fixed Income and Fund Manager at Invesco Mutual Fund, highlighted the strategic advantage of this offering. “The Invesco India Income Plus Arbitrage Active Fund of Fund is a smart alternative to traditional debt investments. It combines the steady returns of fixed income with the low-risk return generation of arbitrage, while also offering better post-tax outcomes,” Garg said.
Market experts believe that the timing of the launch aligns well with the current interest rate environment, where yields on long-duration bonds remain attractive, and arbitrage spreads have improved due to increased market volatility and futures rollovers. This blend provides dual benefits: stability and predictable cash flows from debt, and low-risk return enhancement from arbitrage.
Product Details
The minimum investment required during the NFO period is ₹1,000, with additional investments in multiples of Re 1. Systematic Investment Plans (SIPs) are also allowed starting at ₹1,000 per installment. Importantly, the scheme comes with no exit load, which allows investors the flexibility to redeem their units without penalty.
The fund is suitable for conservative to moderately risk-averse investors, retirees, and those in higher tax brackets looking for efficient alternatives to traditional instruments such as fixed deposits or ultra-short-term bond funds.
Strong Sponsorship and Track Record
Invesco Asset Management (India), the sponsor of the fund, manages over ₹1.25 lakh crore in assets across mutual funds, portfolio management services (PMS), and offshore advisory mandates as of March 2025. Its global parent, Invesco Ltd., is a leading independent investment management firm with over $1.8 trillion in assets under management (AUM) worldwide.
The AMC has a track record of disciplined fund management and risk mitigation. Its approach to fixed-income investing emphasizes quality and duration management, while its arbitrage strategies have historically delivered consistent returns, even during turbulent market phases.
Final Thoughts
In an era where investors are actively seeking risk-adjusted returns with lower tax liability, the Invesco India Income Plus Arbitrage Active Fund of Fund could emerge as a compelling proposition. By combining debt and arbitrage into a single portfolio under active management, the fund offers a diversified, efficient, and accessible solution for generating income with reduced volatility.
For investors aiming to strike a balance between safety, liquidity, and tax-smart returns, this new fund may be worth considering during the NFO window, which remains open until July 16, 2025.
