Union Prudence Fund – Should you Invest in this NFO?
Union Mutual Fund is coming up with its New Mutual Fund Scheme (NFO), Union Prudence Fund. We are seeing the advertisement on leading financial / investment websites which indicates “Karo Relax – Chahey Market Ho Uppar Ya Neechey – Asset Allocation ka tension free funda”. Means you just relax whether market is up or down and with asset allocation, it is tension free. Union Prudence Mutual Fund is an open ended mutual fund scheme that works on dynamic asset allocation Fund. What are the features of Union Prudence Fund? What are the hidden factors in Union Prudence Mutual Fund NFO? Should you invest in such Union Prudence Mutual Fund Scheme which works on dynamic asset allocation fund?
Union Prudence Fund Highlights
Union Mutual Fund AMC is launching this NFO Union Prudence Fund Scheme. The New Fund Offer Scheme specificies below as highlights.
1) This schemes aims at avoiding the timing of market.
2) Scheme says lower volatility and more stability compared to any other equity fund.
3) It indicates this scheme provides opportunity to generate better risk adjusted returns.
4) NFO says active allocation between debt and equity through rigorous process and minimizing subjectivity.
Features of Union Prudence Fund (New Fund Offer-NFO)
1) This NFO opens for subscription on 7th December, 2017.
2) This scheme closes for subscription on 15th December, 2017. It would reopen for subscription from 1st January, 2018.
3) This scheme invests in equity / equity related instruments and debt instruments.
4) Like any other regular NFO, the scheme NAV is Rs 10 per unit.
5) Minimum investment is Rs 5,000 for lumpsum.
6) Minimum SIP amount is Rs 2,000 in case of monthly and Rs 5,000 in case of quarterly investment.
7) Like any other mutual fund scheme, this NFO offers Regular Plans and Direct Plans.
8) Like other funds, this offers growth and dividend options in mutual fund scheme.
9) Union Prudence Fund returns would be benchmarked/compared with Crisil Balanced Fund – Aggressive Index.
What is the objective of this mutual fund scheme?
1) To achieve long term capital appreciation and generate income through an equity portfolio by using long equities, equity derivatives and arbitrage opportunities available.
2) However, there is no assurance that the Investment Objective of the scheme will be achieved.
Where does Union Prudence Mutual Fund invests?
Under general circumstances, this scheme would invests as follows:
1) Equity and Equity related instruments 65% to 100%.
2) Equity derivatives 0% to 45%
3) Debt and Money Market Instruments – 0% to 35%
What are the entry and exit loads in this mutual fund scheme?
Below are the entry and exit loads in this fund.
1) Entry Load – NIL
2) Exit Load – If invested for more than 18 months – Nil
3) Exit Load – If < 20% of the mutual fund units are redeemed before 18 months – Nil.
4) Exit Load – If > 20% or 100% of the mutual fund units are redeemed before 18 months – 1% exit load is applicable.
What are the Fund Management Fees charged in this mutual fund Scheme?
The following are the recurring expenses / Fund Management Fees which would be deducted from the returns every year.
1) Maximum Total Expense Ratio (TER) / Investment Management and Advisory Fees – Upto 2.5%.
2) Additional expenses under regulation – Upto 0.2%.
3) Additional expenses for gross new inflows from specified cities under regulation – Upto 0.3%.
Means the total expense can go upto 3%.
How the mutual funds / NFO are taxed when these are redeemed/sold?
If you have invested in this fund and planning to redeem the mutual fund units, the following income tax rules would apply.
1) If the mutual fund units are redeemed after 1 year – Tax is Nil.
2) If the fund units are redeemed within 1 year – You need to pay Short Term Capital Gains Tax of 15% on the returns you might be getting.
Who is eligible to invest in this Mutual Fund Scheme?
Following are eligible to invest in this New Fund Offer.
1) Indian Residents
2) Hindu Undivided Family (HUF).
3) Minor through parent / legal guardian
4) Partnership Firms and Limited Liability Partnerships (LLPs)
5) Proprietorship in the name of the sole proprietor
6) Companies, Bodies Corporate, Public Sector Undertakings (PSUs), Association of Persons (AOP) or Bodies of Individuals (BOI) and societies registered under the Societies Registration Act, 1860
7) Banks (including Co-operative Banks and Regional Rural Banks) and Financial Institutions
8) Mutual Funds registered with SEBI
9) Non-Resident Indians (NRIs) / Persons of Indian origin (PIOs) residing abroad on repatriation basis or on non-repatriation basis
10) Foreign Institutional Investors (FIIs) and their sub accounts registered with SEBI on repatriation basis
How to apply this NFO?
One can login to their demat account or mutual fund account and go to IPO/NFO section and apply for this NFO.
Which are the other Prudence / Balanced Funds available in the market which are comparable?
There are several balanced funds which can be compared to this NFO.
1) ICICI Balanced Fund – This is similar fund like Union Prudence Fund which is benchmarked to Crisil Balanced Aggressive Fund category. The scheme has given 11% annualized returns in the last 10 years, 18% annualized returns in the last 5 years, 22% returns in the last 1 year. The expense ratio is 2.22%. Means, Union Prudence Fund indicative expense ratio of upto 3% is very high.
2) HDFC Prudence Fund – This is also similar to Union Prudence Fund. The scheme has given 18% annualized returns in the last 5 years and 23% returns in the last 1 year. The expense ratio is 2%. Means, Union Prudence Fund indicative expense ratio upto 3% is very high.
3) L&T India Prudence Fund – This is another fund similar to Union Prudence Fund which is benchmarked to Crisil Balanced Aggressive Fund category. The scheme has given 13% annualized returns in the last 10 years, 17% annualized returns in the last 5 years, 23% returns in the last 1 year. The expense ratio is 2.26%. Means, Union Prudence Fund indicative expense ratio upto 3% is very high.
Union Prudence Fund – Should you Invest in this NFO?
Union Prudence Fund is a new fund offer, hence past performance is not available. This mutual fund scheme invests based on dynamic asset allocation. The scheme indicates that you can invest if you are moderate risk investor. However there are several Balanced funds already available in the market which are tested and showing good performance. If you still want to test it, you can make a invest in it, otherwise you can invest in low risk high return funds or balanced mutual funds which are already performing well.
More info can be read at this link.
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Union Prudence Fund – Should you Invest in this NFO