The spate of fund launches driven by the SEBI fund classification exercise continues with the launch of Union Mutual Fund’s Equity Savings Fund. An Equity Savings Fund uses arbitrage to reduce effective equity allocation while retaining gross equity allocation at 65%. This gives the fund favourable tax treatment as an equity fund without the full risk of equity investment.
Union Equity Savings Fund will have 10-40% of its assets in ‘unhedged’ or pure equity with the rest in debt or arbitrage. It will use arbitrage opportunities for 25-80% of its assets. The fund will be open for subscription between 19th and 30th July in its NFO period. It is an open-ended fund and will reopen for subscription on a continuous basis on 13th August 2018.
The fund will be benchmarked to the Crisil Short Term Debt Hybrid 75+25 Index. This is a conservative index weighted towards debt securities. It assigns 25% weightage to the S&P BSE 200 and 75% to the Crisil Short Term Bond Fund Index. The index has three-year returns of 8.5% and five-year returns of 10.4%.
Vinay Paharia the Chief Investment Officer (CIO) of Union Mutual Fund will be the manager of this scheme. He is the co-fund manager of Union Equity Fund, Union Small Cap Fund, Union Balanced Advantage Fund and Union Asset Allocation Fund. All of these funds have performed poorly being beaten by their benchmarks across all major time-frames. To be fair, Paharia has only recently (April 2018) taken charge as CIO of Union Mutual Fund. He was previously a fund manager with Invesco Mutual Fund.
It remains to be seen whether he will be able to transform the track record of these Union Mutual Fund schemes.
NFO Period: 19th July – 30th July
Minimum Subscription: Rs 5,000
Options: Growth, Dividend Payout, Dividend Sweep
Fund Manager: Vinay Paharia
Benchmark: Crisil Short Term Debt Hybrid 75+25 Index