Union Focussed Largecap Fund is an open-ended equity fund which seeks to generate capital appreciation by investing in a portfolio of select equity and equity linked securities of large cap companies.

Summary

Type	An Open ended equity Scheme	Benchmark Index	S&P BSE 100 Index
Min. investment:	-Lump sum - Rs 5,000 and in multiples of Re 1 thereafter - Systematic Investment Plan - Rs 2,000 and in multiples of Re 1 thereafter (for monthly frequency) & Rs 5,000 and in multiples of Re 1 thereafter (for quarterly frequency)	Plans: Options:	Regular Direct   Growth* Dividend Dividend payout Dividend Reinvestment Dividend Sweep *default option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%
Entry Load	NA	Exit Load:	1% if redeemed within 1 Year from the date of allotment Nil if redeemed after 1 Year from the date of allotment
Issue Opens	April 20, 2017	Issue Closes	April 28, 2017

Investment Objective*

The investment objective of the scheme is to generate capital appreciation by investing in a portfolio of select equity and equity linked securities of large cap companies.

However, there can be no assurance that the investment objectives of the Scheme will be achieved.

*Source: Scheme Information Document

Is this fund for you?

Union Focussed Large Cap Fund (UFLF) is a New Fund Offering from Union Mutual Fund. It is an open-ended equity fund, mandated to invest around 80% - 100% of its net assets into equity and equity related instruments. Being large-cap focused, the fund will have a minimum 80% exposure into predominantly large cap companies. Large cap companies are defined by the scheme as those that have a market capitalisation of up to the top 100th listed company on the Bombay Stock Exchange (BSE) in terms of market capitalisation.

As a part of its defensive strategy, the fund might invest upto 20% of its net assets into debt, money market instruments and cash equivalents. Further, the fund may also invest into derivatives upto a 50% of its net assets.

Large caps are the companies that fall at the uppermost layer of the market capitalisation pyramid. Often, the total market capitalisation of any market is skewed to a very few large companies. These companies act as bellwethers for some major industries of an economy. Large caps are well-established businesses, have stable revenues, high market share and are usually well researched. Performance of large caps is more predictable than their highly volatile midcap peers. They are considered to offer stable and sustainable returns over a period as against the mid and small caps that have potential to deliver high returns but are more volatile by nature.

Due to their huge size, the large cap companies have the ability to weather unfavourable economic conditions. Hence, these companies command a premium over the mid and small cap companies despite growing at a slower pace. Since large cap stocks have limited scope of growth as compared to smaller companies, investing in them at the reasonable valuations is imperative. 

Being positioned as a focused large cap fund, UFLF is expected to hold a compact portfolio of large cap stocks. Hence, while the fund may provide stability to your portfolio especially during highly volatile market conditions, it may be suitable for investors with a high risk profile, given its concentrated strategy. Investors should follow long-term approach and hold patience while investing in this fund.

How will the fund allocate its assets?

Under normal circumstances, the asset allocation pattern followed by the fund will be as under:

Instruments	Indicative allocations (% of total assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity & Equity related instruments predominantly** of large cap companies	80%	100%	High
Debt, Money Market Instruments and Cash equivalent	0%	20%	Low

(*Source: Scheme Information Document)

**Provided a minimum of 80% will be invested in large cap companies. # Large cap companies are companies which have a market capitalization of upto the top 100th listed company on the Bombay Stock Exchange (BSE) in terms of market capitalisation. The scheme intends to limit the number of companies in the portfolio to between 20 – 30 equity stocks.
 

Further, the offer document states that:

• Investment in Securitized Debt – Nil
• Investments in Derivatives – upto 50% of the net assets of the scheme
• Investments in Securities Lending – upto 20% of its net assets of the scheme (where not more than 5% of the net assets of the scheme will be deployed in securities lending to any single counterparty).
• The scheme does not intend to invest in overseas/foreign securities or participate in repo/ reverse repo transactions in corporate debt securities or engage in short selling or in Equity Linked Debentures or participate in credit default swap transactions.

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Investment strategy to be followed by the fund

The investment team at Union KBC mutual fund will follow an active strategy to manage the assets of the fund. Being a large cap oriented equity fund, UFLF will largely follow the below mentioned investment strategy…

For equity allocation:

Being a large cap focused fund UFLF intends to invest in select large cap companies in terms of market capitalisation. Large cap companies are companies that have a market capitalisation of up to the top 100th listed company on the Bombay Stock Exchange (BSE) in terms of market capitalisation.

The portfolio will be created by following a bottom up approach of stock selection, other aspects like asset allocation, sector selection shall also be considered. The scheme intends to limit the number of companies in the portfolio to between 20 – 30 equity stocks. The investment team shall also scan the market for opportunities and shall evaluate the individual companies on their merits, leading to the bottom-up investment decision.

Further, the research team would select stocks based on thorough research and analysis of the companies on various qualitative and quantitative factors. Sector allocation will be decided on the basis of macro factors and considering composition of various sectors within the benchmark. Further, being an open-ended fund it is expected to have a moderate portfolio turnover.

For debt allocation:

Although the fund is intended to generate capital appreciation and maximize the returns by actively investing in stocks of large cap companies the fund will utilise debt and money market instruments as a defensive investment strategy.

In order to achieve the investment objective, the Scheme may take exposure to debt derivatives in accordance with the SEBI Regulations as amended from time to time. The Scheme may use derivative instruments like interest rate swaps, Overnight Indexed Swaps (“OIS”), forward rate agreements, interest rate futures or such other derivative instruments as may be permitted under the applicable regulations.

The fund manager shall use derivatives within the permissible limits actively in-addition to hedging and rebalancing the portfolio. The fund manager could also use active cash calls as a means to rebalance or hedge the portfolio up to the permissible limits.

He will further check list interest rate outlook, risk management guidelines, yield to maturity of the instrument, yield curve analysis, liquidity of the instrument, credit rating, credit spreads and compliance with SEBI guidelines.
 

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Fund Manager Profile

The fund will be managed by Mr. Ashish Ranawade

 Mr. Ashish Ranawade: He is chief Investment Officer at Union Asset Management company Pvt Ltd., with over 22 years of experience in the industry. He is a B.E. (Electronics), MMS (Finance) from JBIMS and EPM from Columbia Business School. Prior to joining Union Asset Management Pvt. Ltd. He has been associated with UTI Asset Management Company Limited and ING Investment Management (India) Limited.

The other schemes managed by him are Union Equity Fund, Union Tax Saver Scheme, Union Small and Midcap Fund, Union Trigger Fund – Series 2 and equity portion of Union Capital Protection Oriented Fund – Series 6 and Union Capital Protection Oriented Fund – Series 7. He also manages Union Asset Allocation Fund - Moderate Plan along with Mr. Parijat Agrawal.

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Fund Outlook

Though there is narrow set of large cap funds in the market, it's the fund's investment style, risk control and fund mandate where fortune of UFLF will lie. The fund manager's approach to generate alpha at the same time mitigating risk will be a test.

As the current market scenario is highly volatile and is expected to remain volatile even in the coming few months, it's advisable to have some exposure in the large cap space. Large cap funds offer more stability as compared to peers in the mid and small cap segment.

If one pays attention to the valuation across market segments and stocks therein, focusing on large-caps and value buying at this juncture would be a prudent strategy as against going gung-ho across market capitalisation segments and stocks. It remains to be seen how the fund managers play the market amid a challenging time – heightened volatility.

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PersonalFN's view

Currently, the market valuations have sky rocketed. We are of the view that, it would be prudent to consider large-cap focused or balanced funds in the current market conditions. But as valuations seem stretched, portfolio construction is going to be restrictive. However, a large cap fund is suitable if you have atleast 3-year time horizon and a moderate risk appetite.

Union Asset Management Company Pvt. Ltd. has been in existence since December 2009 and currently offers 10 funds to its investors. It has gradually built its product basket and this will be its third large-cap biased fund. Unfortunately, none of the schemes of the fund house have made a mark for themselves in terms of performance. It's surprising why the AMC is still adding onto the large-cap focussed funds.

We recommend you to clearly give Union Focussed Largecap Fund a miss – avoid investing; and instead opt for existing large-cap funds that have proven its mettle — such as SBI BlueChip Fund or Birla Sun Life Frontline Equity Fund, that have a strong track record and come from fund house following strong investment processes and systems.

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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

‘PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors.

Terms and condition on which its offer research report
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Details of associates

1. Money Simplified Services Limited;
2. PersonalFN Insurance Services India Limited ;
3. Equitymaster Agora Research Private Limited;
4. Common Sense Living Private Limited;
5. Quantum Advisors Private Limited;
6. Quantum Asset Management Company Private Limited;
7. HelpYourNGO Private Limited;
8. HelpYourNGO Foundation;
9. Natural Streets for Performing Arts Foundation;
10. Primary Real Estate Advisors Private Limited;
11. Rahul Goel;
12. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
 

1. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
2. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.
    

Disclosure with regard to receipt of Compensation

1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months, except that QIS had receive fees for services under sponsorship agreement from Franklin Templeton Asset Management India Pvt. Ltd.
5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
    

General disclosure

1. The Research Analyst has not served as an officer, director or employee of the subject Company.
2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
    

Subject Company means Mutual Fund Schemes

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