Radiant Global Fund

In 2025, the investment landscape is defined by global market volatility, unpredictable interest rate movements, and persistent geopolitical tensions. Against this backdrop, investors ranging from HNIs and family offices to institutional portfolio managers are increasingly turning to low-risk investment strategies that still deliver steady, risk-adjusted returns.

One such strategy that is rapidly gaining momentum is the arbitrage fund, a market-neutral investment approach designed to profit from short-lived pricing inefficiencies between related markets or securities. By taking simultaneous long and short positions in the same or equivalent assets, these funds aim to lock in near risk-free gains, regardless of whether the market is bullish, bearish, or moving sideways.

Unlike traditional mutual funds that rely on market direction for growth, arbitrage mutual funds are built to perform in all market conditions. They operate by capturing small but consistent price gaps through strategies such as:

Cash-futures arbitrage – exploiting price differences between the cash and futures markets
Index arbitrage – leveraging mispricing between stock indices and their constituent stocks
Currency arbitrage – capitalizing on exchange rate differentials across markets
Merger arbitrage – trading around corporate mergers and acquisitions to profit from deal-related mispricings

For many investors, the best arbitrage funds in 2025 offer a compelling combination of capital preservation, low volatility, and returns superior to liquid funds or short-term debt instruments. With global arbitrage opportunities expanding due to faster market connectivity and AI-driven trade execution, these funds are poised to play a pivotal role in modern portfolio construction.

How Arbitrage Fund Returns Compare to Other Asset Classes

Historically, arbitrage fund returns have been modest but reliable. In normal market conditions, they typically deliver 4% to 7% annualized returns, making them a preferred choice for investors who value capital preservation over high-risk growth. In 2025, however, arbitrage funds are benefiting from elevated market volatility, a condition that creates more frequent and wider pricing inefficiencies. This has pushed some best-performing arbitrage funds to deliver 10-12%+ annualized returns, rivaling even short-term corporate bond funds.

Key factors influencing returns in 2025:

Higher volatility → More arbitrage opportunities
Stable interest rate spreads → Predictable profit margins in cash-futures trades
Faster trade execution technology → Reduced slippage and improved capture rates
Cross-border arbitrage → Access to multi-currency and multi-market mispricings

Market Trends Driving Arbitrage Fund Performance in 2025

Increased Institutional Participation – More institutional investors and high-net-worth individuals (HNIs) are allocating significant capital to arbitrage mutual funds for short-term capital deployment, particularly during periods of heightened market uncertainty.
Growth in Cross-Asset Arbitrage – Multi-asset arbitrage across equities, currencies, commodities, and bonds is expanding both return potential and risk diversification.
Tech-Driven Arbitrage Execution – High-speed trading platforms and AI-powered analytics are transforming how arbitrage is executed, enabling funds to detect and capture price discrepancies in milliseconds.
Regulatory Clarity in Emerging Markets – Clearer rules for foreign investment, tax treatment, and fund registration have boosted global participation in arbitrage strategies.

Risk & Return Profile: Why Arbitrage Funds Appeal to Conservative Investors

While arbitrage trading is often seen as low-risk, it’s not entirely risk-free. Key risks include execution risk, regulatory changes, and interest rate changes impacting spreads in derivatives. Still, for investors seeking predictable, low-volatility returns, arbitrage funds remain an attractive option—particularly in choppy markets where directional bets are riskier.

Outlook for Arbitrage Fund Returns in 2025 and Beyond

Industry analysts forecast that arbitrage mutual funds will continue to deliver stable, risk-adjusted returns throughout 2025, driven by favorable market conditions and evolving investment strategies.

Persistent volatility in global markets
Stable-to-slightly-rising interest rates
Wider adoption of cross-market strategies

For investors considering an allocation, the best arbitrage fund will depend on individual portfolio goals, risk tolerance, and investment horizon. Funds with global market access, multi-asset coverage, technology-driven execution, and robust capital preservation frameworks—such as Radiant Global Fund—are particularly well-positioned to outperform peers in the current landscape.

Key Takeaways

Arbitrage funds thrive on market inefficiencies, not market direction.
2025 has been favorable due to increased volatility and AI-driven analytics.
Returns have improved, with some delivering 8%+ annualized.
Ideal for HNIs, institutional investors, and conservative investors.

If you want a low-risk strategy that works in any market condition, now is the time to explore arbitrage funds—and 2025 might just be their best year in over a decade.