Union Retirement Fund NFO – Issue Details and Review

Union Mutual Funds has launched Retirement Fund. Union Retirement Fund NFO would open for subscription on 1st Stptember, 2022. There is a lock-in period of 5 years for such retirement funds. Investors always wonder whether one should invest in simple mutual fund or solution based retirement funds for retirement planning. Should you invest in Union Retirement Fund NFO? Are there any alternative ways to invest instead of investing in such retirement funds?

Also Read: This Midcap Fund generated 26% returns in 1 year

Union Retirement Fund NFO – Issue Details

Here are the issue details of the NFO.

Scheme Opens 01-Sep-22
Scheme Closes 15-Sep-22
Scheme reopens for continuous purchase/sale 29-Sep-22
Minimum Lumpsum Rs 1,000
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Very High Risk
Benchmark S&P BSE 500 Index (TRI)
Fund Manager Mr. Vinay Paharia (CIO)
Mr. Sanjay Bembalkar (Fund Manager)
Max TER 2.25%

Union Retirement Fund NFO SID

Union Retirement Fund NFO  – What is the investment objective?

This is an open ended retirement solution oriented scheme having a lock‐in of 5 years or till retirement age (whichever is earlier).

Union Retirement Fund NFO – Issue Details and Review

The investment objective of the Scheme is to generate long term capital gains by investing in a mix of securities comprising of equity, equity related securities and debt instruments as per the asset allocation pattern of the Scheme with a view to provide a retirement investment solution to investors.

However, there can be no assurance that the investment objective of the scheme will be achieved. The scheme does not guarantee/ indicate any returns.

What is the allocation pattern in this mutual fund scheme?

This fund invests pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity and Equity related instruments 65% 100% High
Debt and Money Market Securities 0% 35% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

Why should you invest in such Mutual Funds?

This retirement fund has a lock-in period of 5 years or till retirement age whichever is earlier. This can help investors not to go for redemptions and generate good returns in medium to long term.

Union Retirement Fund NFO – Risk Factors or Negative Factors

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

1) This retirement fund has a lock-in period of 5 years or till retirement age whichever is earlier. While it is good that the investment would get locked and such investment would grow, in case of emergency, one cannot withdraw their investment.

2) This fund invests between 65% to 100% in equity, which is at high risk.

3) This fund would invest in debt instruments where there is interest rate risk, reinvestment risk, liquidity risk and default risk.

4) This mutual fund invests in REITs and InvITs. These are considered to be high risk.

5) For complete risk factors, one can refer SID / KIM / Prospectus of the mutual fund schemes.

How is the Performance of existing  Retirement Funds?

Currently there are retirement funds already existing. These retirement funds have generated 8% to 15% returns in the last 5 years.

Scheme Name  3 Yrs 5 Yrs
HDFC Retirement Savings Fund Equity Plan 25.2% 15.5%
ICICI Prudential Retirement Fund – Pure Equity Plan 22.7% NA
Tata Retirement Savings Fund – Progressive Plan 17.2% 11.8%
Aditya Birla Sun Life Retirement Fund – The 30s Plan 14.6% NA
Nippon India Retirement Fund – Wealth Creation Scheme 14.4% 8.3%

Union Retirement Fund NFO  – Should you invest?

This retirement fund comes with lock-in period of 5 years or retirement age whichever is earlier. There is nothing great about such schemes except that there is a lock-in period and during that period, investors cannot redeem the funds (this way fund manager can invest in high return investments). However, lock-in period is the biggest negative factor in such schemes. Instead of investing in such retirement funds, investors can invest in aggressive hybrid funds where there is liquidity + one can expect higher returns if they invest for over 5 years. If you see, aggressive hybrid funds invest in similar lines and generated 11% to 18% annualized returns in the last 5 years. I feel these are better than retirement funds.

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Suresh KP

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