Are debt funds safe?? Have you seen what has been happening over the last two years?
When we talk of investments, let us clearly understand that there are risks. But there are many kinds of risks. Repayment defaults, credit worthiness, delay in payments, valuation fluctuations. All these are risks that affect our portfolio construct and we create a portfolio to handle this problem.
Whilst a debt fund puts money on papers that have a defined maturity there is trading associated with these too. So there is a valuation risk in debt funds. The arbitrages offer a better option because the contracts are handled by the exchanges and systems of recovery are better in arbitrages.
To that extent yes, I would say arbitrages are safer than debt funds. But returns in debt could be potentially higher.