Abans Global Arbitrage Fund: A Deep Dive

Abans Investment Managers, a wealth management firm focused on global markets, offers an Arbitrage Fund – Abans Global Arbitrage Opportunities Fund. This investment aims to generate returns by exploiting price discrepancies between various global commodities and currency futures contracts traded on international exchanges.

Investment Strategy

The Abans Global Arbitrage Opportunities Fund employs arbitrage strategies to profit from price inefficiencies across global markets. Let’s understand this by example:

Copper Arbitrage: The fund exploits price differences between copper futures contracts traded on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME). The strategy involves going long on the cheaper contract and short on the costlier one, capitalizing on the price convergence over time.

Currency Arbitrage: The fund identifies price discrepancies between currency futures contracts on different exchanges, such as the Singapore Exchange (SGX) and the Dubai Gold and Commodities Exchange (DGCX), for the Indian Rupee (INR) versus the US Dollar (USD). It profits from these temporary price variations by going long on the cheaper currency and short on the expensive one.

Advantages of the Fund

• Market-Neutral Strategy: The fund aims to deliver returns irrespective of the overall market direction (up or down). This makes it a valuable tool for portfolio diversification.
• Volatility Advantage: The arbitrage strategy thrives on market volatility, potentially generating higher returns during volatile periods.
• Efficient Margining: By utilizing a single broker for executing transactions on both sides of the arbitrage, the fund benefits from efficient margin management, allowing for greater leverage of invested capital.
• Liquidity: The fund offers monthly net asset value (NAV) calculation and redemption flexibility, making it a relatively liquid investment option.

Fund Structure and Management

Abans International Ltd is a private company incorporated in Mauritius. It operates as a Collective Investment Scheme, pooling investments from various individuals. Abans Investment Managers, known for its expertise in quantitative portfolio management, steers the fund’s investment strategy.

Who Can Invest?

While the Abans Global Arbitrage Opportunities Fund is available to investors worldwide including the USA.

NRIs can consider this fund as a good investment option. Since the fund is denominated in US dollars, it aligns well with their existing dollarized assets, simplifying investment in their preferred currency.

Businesses with surplus funds for shorter terms, such as 3 months, may also find this fund attractive.

In general, investors seeking safety of capital with stable, consistent returns and minimal volatility can consider this fund for allocation.

Minimum Investment and Management Fee

The minimum initial investment to participate in this fund is US$100,000. Subsequent contributions can be made in increments of US$1,000.

The fund has a two-part fee structure:

Management Fee: 2% per year, charged on the net asset value (NAV) of your investment. Performance Fee: 20% of any returns that exceed the monthly hurdle rate of 0.5%. In other words, you only pay a performance fee if the fund generates returns above 0.5% in a given month.

Performance of Fund

Key Features of Fund

• US$ Denominated, registered as a Collective Investment Scheme in Mauritius.
• Fund Mandate: To capture arbitrage opportunities across commodities and currencies traded on global exchanges.
• Stable, consistent returns of approx 8% pa in USD terms with a 7.5 year track record.
• Can accept investments from investors across the globe . Resident Indians can invest through LRS.
• No Lock In OR Exit Load. The Fund provides monthly liquidity.
• Minimum Investment: 100,000 US$, available at lower ticket through global platforms like Kristal.

Potential Benefits and Risks

• Potential Benefits: The fund strives to deliver consistent returns by profiting from market inefficiencies. Additionally, it aims to be market neutral, meaning it doesn’t take directional bets on the price movements of underlying assets. This can offer some protection against broader market fluctuations.

• Potential Risks: Although arbitrage opportunities exist, they can be fleeting. The fund’s success hinges on its ability to identify and capitalize on these opportunities quickly and efficiently. Market conditions can also change rapidly, leading to potential losses. Additionally, fees associated with fund management can eat into returns.

Before You Invest: Do Your Due Diligence

While the Abans Global Arbitrage Fund offers a unique strategy, it’s crucial to conduct thorough research before investing. Here are some key considerations:

• Performance History: While past performance isn’t a guarantee of future results, reviewing the fund’s historical returns can offer some insights. Remember, returns can fluctuate significantly.

• Fees and Expenses: Understand the fees associated with investing in the fund. These can include management fees, performance fees, and other administrative charges.

• Investment Strategy: Ensure you grasp the fund’s investment strategy and the inherent risks involved.

• Investment Time Horizon: The fund may be suitable for investors with more than 1 month for investment, as it focuses on capturing short-term market inefficiencies.

Watch this video from Mr. Bhavik Thakkar who is CEO of Abans Investment Manger where he explains about Abans Global Arbitrage Opportunities Fund.

Conclusion

The Abans Global Arbitrage Fund presents an enticing opportunity for investors seeking consistent returns through arbitrage strategies. However, carefully consider your risk tolerance, investment goals, and conduct thorough research before making a decision. Consulting a financial advisor can be beneficial to understand if this fund aligns with your overall investment portfolio.

Ready to explore the potential of the Abans Global Arbitrage Fund? Or seeking a broader range of global investment opportunities? Let’s discuss your options!

Update: September 2024 Abans Global Arbitrage Fund is now registered under regulation D with US SEC. So this fund can also accept investments from US investors.