Union Diversified Equity All Cap Active FOF

The Union Mutual fund is poised to open its NFO, the Union Diversified Equity All Cap Active FOF on 1^st September 2025. In this article we will review the NFO.

Investment dilemma in choosing the ideal market capitalization

Investors face challenges in deciding which market capitalization to invest in and when to make changes. This is because:

• Winners keep changing amongst market caps: Historical performance shows varying returns across large, mid, and small-cap investments. See the chart below that shows the returns from different market caps during the Calendar years 2011-2025. Note that the large caps fell by 25.03%, while small caps dropped by 41.27% in CY 2011. In CY 2021, small caps had the highest return at 57.62%. Timing entry and exit is crucial, as market conditions change frequently but not always possible.
  
  

  

  Source: Union MF. Data is from 1^st January 2011 - 31^st July 2025 , the numbers shown are 1 year CAGR returns. Index considered are BSE 100 Index (Large Cap) TRI, BSE 250 Small Cap Index TRI (Small Cap), BSE 150 MidCap TRI Index (Mid Cap). Calendar Year is considered

Each market cap segment has unique industries, making investment in diversified equity funds one of the potentially most efficient ways to aim for diversification of a portfolio. Certain sectors have market leaders beyond large caps. Exposure to market leaders might require diversification across market caps. Diversified investment in All caps is an effective strategy to capture the diverse opportunity set in the India Growth Story.

Source: NSE

Why invest in a Diversified Equity All Cap FOF?

• Diversification across market caps
  
  

  Diversified Equity funds invest across various market caps. Such diversification ensures that the negative performance of one of the market caps or sectors does not affect the overall performance of the fund.



• Tax Implications of switching funds
  
  

  Switching between funds can lead to significant tax consequences for investors. Diversified Equity funds reallocate funds within equity schemes without the resultant taxes.



• Efficient taxation for FOFs
  
  

  As per the Income Tax, 1961 pursuant to Finance Act (No.2), 2024, applicable from FY 2025-26, FOFs are classified as "Other Mutual Fund". Accordingly, the tax implications for investments made in the Scheme shall be governed by the provisions applicable to Other Mutual Funds. Therefore, funds redeemed in less than 24 months is taxed at slab rate and capital gains from redemptions done more than 24 months is taxed at 12.5%.

Union Diversified Equity All Cap Active FOF: A Strategic Solution

The Union Diversified Equity All Cap Active FOF is an open-ended Fund of Fund (FOF) investing in units of equity-oriented schemes. The NFO opens on 1^st September 2025, and closes on 15^th September, 2025. The scheme re-opens within 5 business days from allotment. The fund offers a strategic approach to manage investments across different market conditions and aims to provide capital appreciation through diversified investments in equity-oriented schemes across various market capitalizations. The fund also offers tax efficiency, as reallocations within the fund are tax-neutral. Investors gain broad diversification through a single investment. The fund is managed by Mr. Gaurav Chopra and Mr. Pratik Dharmshi. The benchmark for the fund is the BSE 500 Index (TRI).

Asset Allocation and Investment Strategy

The fund's asset allocation focuses on equity while maintaining a small portion in debt and money market instruments.

• The allocation is 90%-100% in equity, with 0%-10% in debt and money market instruments.


• The fund manager will adjust the portfolio based on prevailing market conditions.


• The investment strategy includes selecting anchor funds for long-term growth and explorer funds for short-term opportunities. (see graphic below)
  
  

  

  Source: Union MF product presentation. This is the current investment process of the Scheme and the same shall be reviewed from time to time and might change considering the best interest of the unitholders and if the market conditions warrant it.

Who should invest in the Union Diversified Equity All Cap Active FOF

The fund may be suitable for:

1. Investors with a medium to high-risk appetite.


2. Investors looking for expert management with professional fund managers


3. Investors looking for diversification across market caps and dynamically adjust underlying funds.


4. Investors having an investment horizon of more than 5 years.


5. Investors looking for tax efficiency in their investment. Union Diversified Equity All Cap Active FOF is classified as "Other Mutual Fund". Accordingly, the tax implications for investments made in the Scheme shall be governed by the provisions applicable to 'Other Mutual Funds'.

Consult your financial advisor or mutual fund distributor to understand if the fund is suited to you.