Union Mutual Launches Tax-Efficient Income Fund Amid Falling

Mumbai, 21 May 2025: Union Mutual Fund has announced the launch of Union Income Plus Arbitrage Active FOF—an open-ended scheme that seeks to combine the relatively lower volatility of debt investments with the potential of arbitrage strategies along with tax efficiency by investing in units of Arbitrage and Debt Oriented Schemes. The Union Income Plus Arbitrage Active FOF NFO will open for subscriptions on 22nd May 2025 and close on June 5th 2025, and will re-open within 5 business days from allotment. The launch comes at a time when interest rates are on a downward trajectory, prompting investors seeking alternatives to traditional debt fund.

The fund aims to provide income over the medium to long term by investing primarily in units of arbitrage and debt mutual fund schemes. The allocation will be dynamically managed, with up to 65% invested in arbitrage strategies or in debt-oriented funds.

The fund is designed for investors with a medium- to long-term investment horizon, offering a simplified and tax-efficient solution for income generation. By blending allocations through investments in units of arbitrage and debt-oriented mutual fund schemes, the fund aims to deliver a balanced income strategy while benefitting from equity-like tax treatment if held for more than 2 years.

We believe that asset allocation is fundamental not only to wealth creation but also to wealth preservation. While debt portion remains a crucial component of a-balanced portfolio, investor participation in Debt oriented mutual funds schemes has historically been limited. The new tax framework for Fund of Funds (FoFs) presents a valuable opportunity to address this gap by offering a tax-efficient investment option.

Our recent product roadmap—which includes the launch of the Union Multi Asset Allocation Fund (An open-ended scheme investing in Equity, Debt, Gold and/ or Silver) in August 2024, followed by the Union Gold ETF(An open-ended scheme replicating/tracking domestic price of Gold), Union GOLD ETF FUND OF FUND (An open-ended Fund of Fund Scheme investing in units of Union Gold ETF.) , and now the Union Income Plus Arbitrage Active FOF—demonstrates our continued commitment to delivering investor centric solutions, not just launching conventional products.

Key Features and Benefits:

• Tax Efficiency**: Eligible for equity-oriented taxation with long-term capital gains taxed at just 12.5% (including surcharge, excluding cess) if held for more than 24 months.
• Diversified Income Strategy: Combines the potential of income generation of debt funds with the arbitrage opportunities across equity markets.
• Simplified Portfolio Management: Offers access to multiple strategies through a single NAV— eliminating the need to manage multiple fund exposures individually.

Union Income Plus Arbitrage Active FOF seeks to dynamically allocate between arbitrage and debt fund components based on market conditions, aiming to optimize risk-adjusted returns by investing in the units of underlying schemes.

Commenting on the launch, Mr. Parijat Agrawal, Head – Fixed Income, Union AMC Pvt. Ltd., said: “Union Income Plus Arbitrage Active FOF is crafted with an aim to help investors navigate their investments without the burden of constant monitoring. By blending arbitrage and debt funds under a single structure, it simplifies access to professionally managed, tax-efficient income solutions.”

Adding to this, Mr. Madhu Nair, MD & CEO, Union AMC Pvt. Ltd., said: “Higher taxation on conventional debt-oriented funds tends to impact net returns. This fund aims to offer better tax adjusted outcomes, making it a compelling choice for investors seeking tax efficient income generation within their portfolio.