Union Mutual Fund set to launch Medium Duration Fund
Union Asset Management Company (AMC) announces the launch of Union Medium Duration Fund. It is an open-ended medium-term debt scheme that would invest in debt securities and instruments in a way that the Macaulay duration of the portfolio is between three to four years. According to the circular of Securities & Exchange Board of India (SEBI) on mutual fund rationalisation, medium duration funds are those that invest in debt and money market instruments such that the Macaulay duration of the portfolio is between three years to four years.
Presently, there are 16 funds in this category with an average of one-year, three-year, and five-year returns of the category starting at 4.45 per cent, 4.46 per cent and 6.32 per cent, respectively. Further, Union Medium Duration Fund would be benchmarked against CRISIL Medium Term Debt Index. Moreover, the fund would be managed by Parijat Agrawal and Anindya Sarkar. Currently, Parijat Agarwal is co-managing Union Corporate Bond Fund with Anindya Sarkar while the former also manages Union Dynamic Bond Fund.
In a press release, G. Pradeepkumar, Chief Executive Officer (CEO) of Union Asset Management Company Private Limited said, “The portfolio construction of this scheme is aimed to be done with a prudent combination of strategic allocation to PSU or corporate bonds of high credit quality and tactical allocation to securities issued by Government of India.”
Further, talking about the current fixed income market, he added, “In recent times, the interest rates on short term securities have come down considerably but the rates on longer-term securities are still at an elevated level. The spread between yields of short term and long term securities has widened and is at a level above their long term average. In the future, as this gap narrows, the yields of long term securities are expected to fall resulting in gains for investors.”
The new fund offer (NFO) opens on August 24, 2020, and closes on September 7, 2020. Thereafter, the allotment would be on September 14, 2020, and will re-open for continuous sale and repurchase on September 21, 2020.