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Union Hybrid Equity Fund NFO: Should You Invest?


Union Hybrid Equity Fund launched by Union Mutual Fund (promoted by Union Bank) is launching an ope-ended hybrid scheme investing predominantly in equity and equity related instruments.


The New Fund Offer will open for subscription on November 27, 2020 and will close on December 11, 2020.

Should You invest in the Union Hybrid Equity Fund NFO?

The one problem that we see with the offer is the timing. The fund maybe forced to invest when the stock markets are at a record high, leaving it vulnerable to a downside risk in the portfolio and hence the returns.

Let's explain a little bit more in detail. The Sensex this year has hit a historic high of 44,000 points and is currently trading at 43,780. The index hit a low of below 26,000 points in March this year. This means the fund is likely to invest when equity prices are high, which is not the best investment strategy.

Union Hybrid Equity Fund NFO: Should You Invest?

Also, since it is an equity fund, it cannot park a lot of money in debt and wait for the markets to fall. This is perhaps the only negative for the offer. In any case, this being an equity fund it is suitable to investors who are looking to build long term wealth with less volatility.


Union Hybrid Equity Fund would invest in Equity and Equity related instruments to the tune of 65% to 80% and Debt and Money Market instruments to the tune of 20% -35%.

As we all know that debt instruments are giving very poor returns. For example, bank fixed deposits are at best giving an interest rate of 5 to 6 per cent in large banks. Over the last few years the Nifty 50 has given superior average returns of 16.57%, but with higher risk. Equities over the long term have given superior returns than bank deposits.

Since the markets are at peak levels, we would advise investors to invest smaller amounts and perhaps go in for an SIP, when the scheme opens for sale and repurchase on December 28, 2020.

To an extent, investing in equity mutual funds is all about getting the timing right, when you are investing a lumpsum, or else you are likely to be hit by poor returns.

About the author

Sunil Fernandes has spent 26 years covering business and finance in India and abroad and is currently the Managing Editor of Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. Sunil's areas of interest include commodities, equities, mutual funds, tax planning and debt instruments.

Story first published: Thursday, November 26, 2020, 11:48 [IST]
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