Union Active Momentum Fund – Direct (G): NFO Details

Union Active Momentum Fund Direct (G) is an open-ended thematic equity scheme launched by Union Mutual Fund, aiming to generate long-term capital appreciation by investing in stocks exhibiting strong momentum. The fund leverages a proprietary momentum model to identify and invest in stocks showing superior price trends. Managed by experienced fund managers, this scheme offers growth and IDCW plans with a minimum investment of ₹1,000. Benchmarking against NIFTY 500 TRI, the fund actively adjusts its portfolio to capitalize on market trends while maintaining a high risk rating.

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Details of the NFO: Union Active Momentum Fund – Direct (G)

Investment Objective  

The Union Active Momentum Fund – Direct (G) aims to achieve long-term capital appreciation by actively investing in stocks exhibiting strong momentum. These stocks are selected based on their superior price performance relative to others, reflecting the trend that past winners tend to continue outperforming, while past losers often underperform. The scheme follows a disciplined, rule based investment approach to capture market opportunities effectively while maintaining a diversified equity portfolio.

Investment Strategy  

The Union Active Momentum Fund – Direct (G) employs an active, rule based momentum investing strategy, leveraging proprietary models that analyse historical price performance, volatility, relative strength, and liquidity. It focuses on constructing a dynamic portfolio by selecting from the top 1,000 companies by free float market capitalization. The strategy emphasizes timely rebalancing, often quarterly, to capitalize on outperforming sectors and stocks. With a disciplined entry and exit mechanism, the portfolio adapts to changing market conditions. The fund also incorporates hedging strategies during market downturns and maintains flexibility for trading opportunities to optimize returns while minimizing transaction costs.

Risk Associated with Active Momentum Fund – Direct (G)   

The Active Momentum Fund – Direct (G) involves risks typical of thematic equity schemes, including higher volatility due to its momentum focused strategy. Market risk, business risk, and risks associated with derivatives and thematic concentration are prominent. Momentum investing carries specific risks like moving into positions too early or exiting too late, potentially leading to losses. Other risks include credit risk, liquidity risk, counterparty risk, and risks tied to REITs, InvITs, and debt instruments with special features. Frequent portfolio churning may also amplify risks, and adverse market trends may impact performance.

The portfolio will be constructed using our in-house proprietary screens which look at many factors, namely historical price performance, volatility of returns, relative strength, liquidity, etc., to name a few. The Scheme will be a diversified equity fund which will invest predominantly in equity and equity-related securities selected based on in-house proprietary screens. The Scheme is thematic in nature, hence will be affected by the risks associated with the momentum theme. The momentum theme-based portfolio may result in a higher level of volatility vis-à-vis portfolios of other diversified equity-oriented schemes. Investing in thematic schemes is based on the premise that the Scheme will seek to invest in companies belonging to a specific theme.

This will limit the capability of the Scheme to invest in other companies/themes. Also, as with all equity investing, there is a risk that companies in that theme will not achieve expected earnings results, or that an unexpected change in the market or within the company will occur, both of which may adversely affect investment results. Risks of momentum trading include moving into a position too early, closing out too late, and getting distracted and missing key trends and technical deviations.

Who Should Invest in Active Momentum Fund – Direct (G)?  

This fund is suitable for investors seeking capital appreciation over the long term and are comfortable with very high risk investments. Ideal investors include those interested in thematic equity schemes focused on momentum based strategies and those with a robust risk appetite willing to withstand market volatility. It is best suited for individuals with a long-term investment horizon and a desire to capitalize on dynamic market trends.