Union
Mutual Fund is coming out with a NFO in the form of Union Hybrid Equity Fund.
Union
Hybrid Equity Fund would be an aggressive hybrid mutual fund.
The fund
would be open for subscription from November 27, 2020 to December 11, 2020.
The fund
would thereafter be open for repurchase from December 28, 2020.
NFO details for Union Hybrid Equity Fund
|
Scheme Opens |
27/11/2020 |
|
Scheme Closes |
11/12/2020 |
|
Scheme Re-opens |
28/12/2020 |
|
Fund Manager |
Mr. Vinay Paharia (Equity) Mr. Parijat Agrawal (Fixed Income) Mr. Hardick Bora (Equity) |
|
Benchmark |
CRISIL Hybrid 35+65 Aggressive
Index (TRI) |
|
Minimum Investment (Lumpsum) |
5,000 |
|
Minimum Investment (SIP) |
2,000 |
|
Fund Category |
Aggressive Hybrid |
|
Exit Load |
1% if redeemed within a year |
Union
Hybrid Equity would be an open - ended hybrid scheme that would be
predominantly investing in equity and equity related instruments.
Union Hybrid Equity Fund Investment Objectives
The investment
objective of the fund is to attain long term growth while investing
predominantly in equity and equity related instruments.
The fund
would also invest in debt and money market instruments but largely in equity.
Union Hybrid Equity Fund Allocation
The asset
allocation for the fund would be something like this:
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity Related
instruments |
65 |
80 |
|
Debt and Money market instruments |
20 |
35 |
|
Units issues by REITS and InvITs |
0 |
10 |
The above
figures are only indicative and not fixed, the fund managers have the liberty
to move across the asset classes depending upon prevailing market conditions as
long as they remain within the mandate permitted.
The fund
can also invest in REITs and InvITs if so desired.
Union Hybrid Equity Fund Options
Union Hybrid Equity mutual fund provides investors with the
following two options:
Growth: This option is most suited for investors who are not
seeking dividends or who are not dependent on mutual fund dividends as a source
of monthly income and would rather see their capital appreciate.
Dividend: This option is most suited for investors who are
seeking dividends or who are dependent on mutual fund dividends as a source of
monthly income and are not looking for capital appreciation.
The Dividend option further has the following options:
- Dividend re-investment facility
- Dividend payout facility
- Dividend sweep facility
In case you do not opt for a particular option between growth
and dividend then the default option would be growth.
In case you opt for dividend option but fail to mention the
facility then the default facility would be reinvestment facility.
Additional reading: Click Here to read our complete report of why you should NOT invest in Dividend mutual funds.
What are
hybrid mutual funds?
Hybrid mutual funds are mutual fund schemes that invests in
two or more asset classes.
Each category within the hybrid mutual fund space has their
own unique asset allocation and investing style.
For eg. Multi asset mutual funds invests in a minimum of
three or more asset classes with a minimum of 10% allocation in each of the
three asset classes at all times mandatory.
An aggressive hybrid mutual fund is one where a minimum of
65% has to be invested into equity at all times which can go upto 80% maximum
if so desired.
The debt portion has to be kept at a minimum of 20% at all
times.
An aggressive hybrid mutual fund has a higher equity proportion
whereas a conservative hybrid mutual fund has a lower equity proportion.
Therefore, an aggressive hybrid mutual fund is taxed as an
equity fund whereas a conservative hybrid fund is taxed as a debt fund.
Advantages
of Aggressive Hybrid mutual funds
An aggressive hybrid mutual fund can be seen as a good low
risk first step into mutual funds for a first-time mutual fund investor.
The key word here is ‘low’.
Mutual funds will be always be risky, be it equity or debt.
Aggressive hybrid mutual funds though tend to be less
volatile as compared to the following categories:
- Multicap mutual funds
- Large & Mid cap mutual funds
- Focused mutual funds
- Mid cap mutual funds
- Small cap mutual funds and so on.
Another key advantage of an aggressive hybrid mutual fund is
that you do not have to worry about asset allocation or re balancing.
This will be taken care by the fund manager.
If the fund manager believes the market is over valued then
he can reduce the fund’s equity allocation and if he believes the market is
under valued then he can increase the fund’s equity allocation.
How
are aggressive hybrid mutual funds taxed?
The taxation for hybrid mutual funds varies from category to
category.
An aggressive hybrid mutual fund needs a minimum of 65% investment
into equity at all times and is therefore taxed as an equity mutual fund.
A conservative mutual fund has more allocation to debt and
money market instruments and even cash so is therefore taxed a debt fund.
A multi asset allocation on the other hand is the only
mutual fund category to not have one uniform tax system for the category.
The tax structure applied here varies from scheme to scheme
within the same category.
If a particular multi asset mutual fund has an equity
allocation of minimum 65% then it is taxed as an equity mutual fund whereas a
multi asset mutual fund that does not have a minimum 65% equity allocation is taxed
as a debt mutual fund.
For any mutual fund to qualify as an equity mutual fund and
be taxed accordingly, it needs to have a minimum 65% investments into equity at
all times.
Union Hybrid Equity Fund would be taxed as an equity mutual
fund.
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