Union Midcap Fund NFO – Midcaps Bouncing back – Should you invest then?

Union Midcap Fund NFO ReviewUnion Midcap Fund NFO Review


Midcap stocks are bouncing back in the last couple of few months. Many experts are indicating it is the right time to invest in midcap mutual fund schemes now. To encash the opportunities in a midcap segment, Union Mutual Funds have come up with its new mid-cap mutual fund scheme. Union Midcap Fund NFO would open for subscription on 2nd March, 2020. This mid cap fund would invest in midcap cap stocks in India. Currently the mid-cap segment is bouncing back in the last 4-6 months. In these circumstances, Should you invest in the Union Midcap Fund NFO? What are the risk factors an investor should consider before investing in such midcap mutual fund schemes?

Also Read: Best Largecap Mutual Funds to invest

Union Midcap Fund NFO Issue Details


This is an open-ended mutual fund equity scheme.

This is a midcap mutual fund scheme that invests in midcap stocks in India. These midcap stocks would be from the 101st to the 250th company in terms of market capitalization.

This scheme would open for subscription on 2nd March, 2020.

This scheme would close for subscription on 16th March, 2020.

Since this is an open ended scheme, it would again open for subscription after 10 business days from the date of allotment of Mf units after the NFO period.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 2,000 per month for monthly SIP and for a tenure of 6 months.

The NAV of the NFO is Rs 10 per unit now during initial subscription.

There is no entry load to invest in this mutual fund scheme.

If one wants to exit before 1 year from the date of investment, there is a 1% exit load.

This midcap scheme is classified as moderately high risk scheme.

Scheme total expense ratio (TER) is estimated at a maximum of 2.25% of the total assets on any day.

Union Midcap Fund NFO details can be downloaded from here.

Who can invest in this mutual fund scheme?


Any of the following can invest in this scheme in this scheme.

1) Resident Individuals

2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,

3) NRI’s

4) Foreign Portfolio Investors

Who is the Fund Manager of Union Midcap Fund NFO?


1) Mr. Vinay Paharia (Chief Investment Officer)

2) Mr. Hardick Bora (Fund Manager – Equity)

What is the benchmark for this scheme?


The benchmark for this scheme is NIFTY Midcap 100 TRI.

What is the investment objective and strategy of this Union Midcap Fund?


The investment objective of the Scheme is to achieve long term capital appreciation and generate income by investing predominantly in equity and equity related securities of mid cap companies.

Also Read: Best Smallcap Mutual Fund Schemes to invest in 2020

What is the allocation pattern in this midcap fund?


This fund investment pattern is as follows:

1) It invests 65% to 100% in equity and equity related Instruments of midcap companies in India. The risk profile in this segment is medium to high.

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2) It invests 0% to 35% in equity and equity related instruments of other than midcap companies. The risk profile in this segment is high.

3) It invests 0% to 35% in debt and money market instruments. This risk profile in this segment is low to medium.

4) It would invest 0% to 10% in units issued by REITs and InvITs. The risk profile in this segment is medium to high.

Can NRI invest in this MF scheme?


Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.

Why should you invest in such Midcap Funds now?


Here are a few reasons to invest in midcap funds.

1) The universe of midcap stocks is high. Any company with 101st to the 250th company in terms of market capitalization is termed as midcap. This provides a good opportunity to invest in a wider scope of companies.

2) There are several companies which are emerging now from small cap to midcap and that have good growth potential for investment.

3) The midcap segment has fallen by over 30% in the 2018. Every time there is fall in such stocks, there is a bounce back in subsequent years. This trend is seen in the last 10 years for several times. If you observe this segment started bouncing back in the last 4-6 months and the momentum is expected to continue.

Some key risk factors you should consider before you invest in such midcap funds


One should consider some of these risk factors / negative factors before investing.

1) This scheme invests in mid-cap stocks that are high risk. Even if Sensex/NIFTY is moving in a positive direction, midcap stocks can move in a negative direction (which we are seeing now in the last 1.5 to 2 years). Hence Stock Market direction could be different from SENSEX Vs midcap stocks.

2) Investors should not assume any guaranteed returns from such midcap mutual fund schemes.

3) Since it is a new mutual fund scheme, there is no past performance, hence we would know how the fund would perform in the future.

4) It invests upto 35% in debt instruments where there is interest rate risk.

How is the Performance of Midcap Mutual Funds in India?


Currently there are existing midcap mutual fund schemes in India. While the midcap funds have picked-up only in the last 4-6 months after almost 1.5 to 2 years of downfall, this picture would help you to know the potential opportunities of investing in midcap funds. Let us see how some of the midcap funds performing in the last 5-10 years.

1) DSP Midcap Fund: This fund gave 15% annualized returns in the last 10 years, 10% annualized returns in the last 5 years, 8% annualised returns in the last 3 years. In the short to medium term, this fund gave 15% returns in the last 1 year and 4% returns in the last 3 months, indicating a strong bounce back now.

2) Kotak Emerging Equities Fund: This fund gave 15% annualized returns in the last 10 years, 10% annualized returns in the last 5 years, 7.5% annualised returns in the last 3 years. In the short to medium term, this fund gave 15% returns in the last 1 year and 2.5% returns in the last 3 months.

3) L&T Midcap Fund: This fund gave 14% annualized returns in the last 10 years, 9% annualized returns in the last 5 years, 6% annualised returns in the last 3 years. In the short to medium term, this fund gave 7.3% returns in the last 1 year and 2% returns in the last 3 months.

4) Invesco India Midcap Fund: This fund gave 16% annualized returns in the last 10 years, 8% annualized returns in the last 5 years, 10% annualised returns in the last 3 years. In the short to medium term, this fund gave 15% returns in the last 1 year and 6% returns in the last 3 months, indicating a strong bounce back in midcap segments now.

5) HDFC Midcap Opps Fund: This fund gave 16% annualized returns in the last 10 years, 8% annualized returns in the last 5 years, 5% annualised returns in the last 3 years. In the short to medium term, this fund gave 6% returns in the last 1 year and 1% returns in the last 3 months.

Should you invest in Union Midcap Fund NFO?


One year back, I have indicated that midcap mutual funds would bounce back by the end of Dec or by early 2020. The midcap segment is showing signs of good improvement in the last 4-6 months. The Union Midcap Mutual Fund is a relatively new fund in the midcap segment. However, considering growth opportunities in a midcap segment, high risk investors can invest in this scheme. If you do not want to test with new midcap MFs, you can invest in some of  the best midcap mutual fund schemes which we recommended few months back.

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Suresh KP

Union Midcap Fund NFO Review

Suresh KP

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