Union Innovation & Opportunities Fund NFO – Issue Details and Review

Union MF has launched Union Innovation & Opportunities Fund NFO. This new fund offer would open for subscription on August 16, 2023, and closes on August 30, 2023 during initial phase of subscription. This is an equity mutual fund that follows innovation theme. In this article, we would provide Union Innovation & Opportunities Fund NFO issue details and whether you should invest or avoid.

Union Innovation & Opportunities Fund – NFO issue details

This is an open-ended mutual fund equity scheme. Here are the NFO details.

NFO Opens 16-Aug-23
NFO closes 30-Aug-23
Scheme reopens for continuous purchase/sale 13-Sep-23
Minimum Application Amount Rs 1,000 and in multiples of Rs  1 thereafter
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% exit load if redeeemed within 1 year
Risk Very High Risk
Benchmark Nifty 500 Index (TRI)
Fund Manager Mr. Sanjay Bembalkar
Mr Hardick Bora

What is the investment objective of Union Innovation & Opportunities Fund NFO?

The Investment Objective of the Scheme is to achieve long term capital appreciation by investing predominantly in equity and equity related securities of Innovative Companies.

What is the allocation pattern in this mutual fund scheme?

Here is the allocation pattern of this scheme.

Type of instruments Min % Max % Risk Profile
Equity and Equity Related Instruments of Innovative Companies 80% 100% Very High
Equity and Equity Related Instruments of other than above Companies 0% 20% Very High
Units issued by REITs and InvITs 0% 10% Medium to High
Debt and Money Market Securities 0% 20% Low to Medium
Units issued by REITs and InvITs 0% 10% Very High

Why to invest in the Union Innovation & Opportunities Fund?

Here are a few reasons to invest in this fund.

  • The fund aims to achieve its objective by predominantly investing in Innovative Companies, which are expected to offer superior risk-reward potential. These Innovative Companies are likely to: disrupt industries, introduce new products, services, processes, or business models, or be part of industries experiencing favorable shifts in demand due to disruption or innovation.
  • The fund manager follows a fundamentals-based bottom-up approach to identify these carefully selected stocks with attractive growth opportunities.
  • Additionally, the fund considers aspects like asset allocation and sector allocation as outcomes of stock selection. The manager also has some flexibility to invest up to 20% of net assets in other securities, including debt and money market instruments, REITs and InvITs etc.,
  • Overall, investing in this mutual fund offers the potential for capital appreciation by focusing on innovative companies with promising growth prospects, while also maintaining a level of diversification through other permissible instruments and securities.

Why should you avoid Union Innovation & Opportunities Fund NFO?

Investing in this mutual fund involves several risks, as summarized below:

  • Volatility and Price Fluctuations: Equity and equity-related instruments of Innovative Companies are subject to daily price fluctuations due to micro and macro factors, making them volatile and riskier compared to conventional equities.
  • Concentration Risk: The fund’s focus on Innovative Companies that challenge and disrupt existing industries may lead to concentrated exposure to a single theme. If this theme underperforms, it could adversely affect the fund’s performance.
  • Risks in Fixed Income Securities: The fund’s investments in debt and money market instruments are sensitive to changes in interest rates, and various risks such as re-investment risk, spread risk, credit/default risk, and prepayment risk.
  • Risks in Instruments with Special Features: Special features in certain debt instruments may lead to subordination to equity, coupon discretion, early recall, and liquidity risk, impacting the fund’s performance.
  • Derivatives Risk: The use of derivatives can result in disproportionate gains or losses, and the success of derivative strategies depends on the fund manager’s ability to identify opportunities.
  • Securities Lending Risk: Securities lending entails risks related to the failure of the approved intermediary to comply with the agreement, leading to potential loss of rights to collateral and corporate benefits.
  • Risks in Securities Segment and Tri-party Repo Trade Settlement: The fund’s contribution to the default fund of CCIL exposes it to settlement/default losses of other members, affecting its capital.
  • Risks in REITs and InvITs: Investment in REITs and InvITs carries liquidity risk, re-investment risk, price risk, interest rate risk, credit risk, and regulatory/legal risk.
  • Risks in Segregated Portfolio: If a segregated portfolio is created, unit holders may face restrictions on liquidating their holdings until the issuer’s recovery, and the value of securities in the segregated portfolio may not be realized. The liquidity and trading price of units on the stock exchange may also differ significantly from the NAV.

Investors should carefully consider these risks and assess their risk tolerance before investing in this mutual fund.

Performance of existing Innovation Funds

Currently there is only one innovation fund which was launched few months back i.e. ICICI Innovation Fund which generated over 14% returns in the last 3 months.

Should you invest in Union Innovation & Opportunities Fund NFO?

Union Innovation & Opportunities Fund offers potential growth opportunities by investing in innovative companies with superior risk-reward potential, providing attractive options for capital appreciation.

However, the fund’s concentration in volatile equity and equity-related instruments of innovative companies and exposure to specific themes pose significant risks.

High risk investors can invest in such funds for medium term perspective. These funds are not for long term. However, moderate risk investors should prefer stable and diversified portfolio of mutual funds instead of these innovative funds.

Source Data: Union Innovation & Opportunities Fund SID

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