Union KBC Trigger Fund with Profit Trigger Option
Union KBC Trigger Fund is first of its kind in India from the house of Union KBC Mutual Fund. Union KBC Mutual Fund, which is a joint venture of Union Bank of India and KBC Asset Management NV. This is a 3 year close ended fund with a profit trigger to benefit investors who wish to redeem without watching Mutual Fund NAV on regular basis.
New Fund Offer Opens on : 14 Oct 2013
New Fund Offer Closed on: 25 Oct 2013
Union KBC Trigger Fund is a profit trigger fund which triggers when the profit reaches 30% of Issue price. As the Issue price of at NFO is 10 rupees, the fund triggers when NAV reaches Rupees 13. If fund NAV does not reaches its profit trigger before 3 years it will be redeemed automatically at the end of 3 years. Minimum amount of investment during NFO is 5000 rupees and in multiples of Rupees 10 thereafter.
This fund is suitable for investors seeking Capital Appreciation during the tenure of the Scheme. Union KBC Trigger Fund Series -1 Invests predominantly in Equity and Equity related portfolio constituting S&P BSE 200 Index Companies. As Union KBC Trigger fund is investing primarily in equities its risk is high and as per colour code for risk in mutual funds it is brown. One can avail the option of availing ASBA (Applications Supported by Blocked Amount). Units of Union KBC Trigger Fund can be availed either in demat or physical mode. To avail units in demat mode investors need to provide their DP ID int he application.
Read more details about colour coding and nature of risks in mutual funds here.
This fund is available under Direct and Regular Schemes. In direct scheme, investors can apply directly with fund house without going through any distributor. In regular scheme, one can invest through any distributor. There are no distribution expenses under direct option. In regular option distribution expenses are deducted. (Distribution expenses are 150 rupees for first time investors across any mutual fund or 100 rupees for old investors if investment amount is more than 10000). There is no deduction of distributor expense if the investment amount is less than 10000.
As Union KBC Trigger Fund Series 1 is a close ended fund there is no redemption option. If investors need to redeem their units before 3 years (Maximum fund closing time) or trigger of profit level, they can sell on stock exchange. This fund is proposed to be listed on National Stock Exchange of India. The bench mark of the fund is S&P BSE 200 Index.
As mentioned, the fund will automatically redeem if the NAV of the fund reaches 30% (NAV of 13 rupees). NAV of Direct Plan is considered for this purpose. Direct plan NAV will be slightly higher than regular plan due to distributor expenses. One should be aware that actual amount paid to investors may not be 13 rupees. The reason for this is, the final maturity date will be 10 business days after profit trigger date.
As investors are aware, wide fluctuations can happen in 10 business days in equity markets. So the actual NAV paid may differ from profit trigger level of 13, if the trigger happens before 3 years.
Examples of profit trigger in the fund (Source: Union KBC Trigger Fund Series -1 Scheme Information Document)
Suppose the units were allotted at Rs.10 on 1st April 2013. The NAV of Direct Plan of the Scheme crosses Rs.13 on 1st January, 2015. The scheme will mature on the 10th working day from 1st January, 2015. If the NAV of Direct Plan of the Scheme fluctuates to Rs.13.5 and Regular Plan to Rs. 13.4 on the date of maturity (due to market movements and interest accrual between 1st January, 2015 to the date of maturity), the units shall be redeemed at the NAV of respective Plans i.e. Rs.13.5 per unit for Direct Plan and Rs. 13.4 of Regular Plan.
ii. Suppose the units were allotted at Rs.10 on 1st April 2013. The NAV of Direct Plan of the Scheme crosses Rs.13 on 1st January, 2015. The scheme will mature on the 10th working day from 1st January, 2015. If the NAV of Direct Plan of the Scheme fluctuates to Rs.12.5 and Regular Plan to Rs. 12.4 on the date of maturity (due to market movements between 1st January, 2015 to the date of maturity), the units shall be redeemed at the NAV of respective Plans i.e. Rs.12.5 per unit for Direct Plan and Rs. 12.4 of Regular Plan.
iii. Suppose the units were allotted at Rs.10 on 1st April 2013. The NAV of the Direct Plan of the Scheme crosses Rs.13 on 1st January, 2015. The NAV of Regular Plan of the Scheme is Rs. 12.92 on 1st January, 2015. The scheme will mature on the 10th working day from 1st January, 2015 eventhough the NAV of Regular Plan may be below Rs. 13. If the NAV of Direct Plan of the Scheme fluctuates to Rs.12.5 and Regular Plan to Rs. 12.4 on the date of maturity (due to market movements between 1st January, 2015 to the date of maturity), the units shall be redeemed at the NAV of respective Plans i.e. Rs.12.5 per unit for Direct Plan and Rs. 12.4 of Regular Plan.
iv. Suppose the units were allotted at Rs.10 on 1st April 2013. The Direct Plan NAV does not cross Rs.13 within 3 years of 1st April, 2013. The scheme will mature on completion of three years i.e. on 31st March 2016 at the per unit NAV value prevalent on 31st March 2016 of the respective Plans.
If the maturity date falls on a non-business day, then the maturity date shall be the next Business Day.
An analysis of BSE 200 in the last three years has revealed that there are 35 per cent chances of the index delivering a return of Rs 3 in one year. The possibility achieving 30 per cent return in two years was 60 per cent and it was 80 per cent in three years.
Please read scheme information document carefully before investing in mutual funds.