Union Mutual Fund is planning to launch a Hybrid equity fund that would open for subscription from November 27, 2020. The Union Hybrid Equity Fund is an aggressive hybrid fund that invests 65% to 80% of its portfolio in equity and balance in debt instruments. During volatile stock markets, investing in balanced / hybrid mutual funds could be the best bet. Should you invest in the Union Hybrid Equity Fund NFO? What are the risk factors one should consider before investing in such funds?
Also Read: Best Balanced Mutual Funds to invest in 2020
What are Hybrid Mutual Funds?
Hybrid mutual funds, also called as balanced mutual funds invests in equity and debt instruments based on the investment objectives of the fund. These hybrid funds are further classified in several sub categories for the purpose of risk assessment. Let us discuss about aggressive hybrid funds and conservative hybrid funds here.
Aggressive hybrid funds invests majorly in equity (e.g. 65% to 80%) and balance in debt instruments. These are for moderate to high risk investors.
On the other side conservative hybrid funds invests a major portion in debt instruments (e.g. 75%) and balance in equity instruments. These are low risk compared to aggressive funds.
Union Hybrid equity fund would invest 65% to 80% in equity, hence it is aggressive hybrid mutual fund scheme.
Union Hybrid Equity Fund NFO – Issue Details
This is an open-ended mutual fund. Here are the NFO issue details.
|Union Hybrid Fund Equity NFO – Issue Details
|Scheme reopens for continous purchase/sale
|Minimum investment (Lumpsump)
|Minimum investment (SIP)
|NAV of the fund
|Rs 10 during NFO period
|1% if exited within 1 year
|Moderate High Risk
|Max Total expense Ratio (TER)
|CRISIL Hybrid 35+65 Aggressive Index (TRI)
|Mr. Vinay Paharia
Download Union Hybrid Equity Fund SID
Who is eligible to invest in this mutual fund scheme?
The following can invest in this scheme.
1) Indian resident adult individuals, either singly or jointly.
2) Minors through Parents/Lawful Guardian.
3) Hindu Undivided Family (HUF) through its Karta.
4) Partnership Firms in the name of any one of the partners.
5) Proprietorship in the name of the sole proprietor.
6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.
8) Non-Resident Indians (NRIs) / Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis;
Complete list of eligible participants who can invest can be checked in the NFO prospectus.
Union Hybrid Equity Fund NFO – Investment Objectives
The investment objective of the scheme is to achieve long term capital growth and generate income from a portfolio, predominantly of equity and equity related securities. The scheme will also invest in debt & money market instruments.
However, there can be no assurance that the investment objective of the Scheme will be achieved.
What is the allocation pattern in this mutual fund scheme?
|Type of instruments
|Equity and Equity related Securities
|65% to 80%
|Debt and Money Market instruments
|20% to 35%
|Low to medium
|Units issued by REITs & InvITs
|0% to 10%
|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. However, Resident of Canada, US persons and OCBs cannot invest in this scheme.
You may also like: Best SIP Investment Plans in India
Why should you invest in Union Hybrid Equity Fund?
Here are a few reasons to invest in such schemes.
1) This fund invests 65% to 80% in equity and balance in debt instruments. While an equity portion provides growth, debt component provides stable income.
2) Since these funds invest in debt component too, these are less volatile compared to other equity funds
3) Such hybrid funds provide automatic portfolio balancing which is beneficial during volatile stock markets.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) While this fund invests in debt component too, it is limited between to 20% to 35%. Aggressive funds have a higher equity component which is still risk.
2) This fund invests in debt instruments where one has to bear interest rate risk, credit risk, liquidity risk and default risks.
3) This fund invests in derivatives, REITs and InvITs which are high risk.
4) Investors should read the NFO prospectus for complete risk factors of investing in this mutual fund scheme.
How is the Performance of Aggressive Hybrid Mutual Funds?
Currently there are a few aggressive hybrid funds, let us check the performance of these funds.
Also Read: Best SIP Plans for 5 years
Should you invest in Union Hybrid Equity Fund NFO?
Union Hybrid Equity Fund is an aggressive hybrid fund that invests 65% to 80% in equity and balance in debt instruments. One should always allocate some portion of their portfolio in hybrid funds to get stable returns during volatile stock markets. Since this fund is new, there is no past history. If you would like to test with such new hybrid funds, you can invest, otherwise, you can invest in some of the top performing aggressive hybrid funds that are already existing and proven the performance.
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