Union KBC Mutual Fund, a joint venture between Union Bank and Belgium-based asset management company KBC, has launched first of its kind three-year close-ended scheme that triggers full redemption once the targeted return is achieved.

Automatic liquidation

When the Union KBC Trigger Fund — Series I achieves a NAV of Rs 13 it will automatically be liquidated and proceeds distributed on the 10th business day of the event. On the contrary, if the net asset value does not touch Rs 13 within three years period, the scheme will be closed and returns distributed at the NAV that would be prevailing then.

There is neither guaranteed return nor capital protection under this scheme, which will be open for subscription from October 14 to 25. The offer price is Rs 10 per unit with minimum application amount of Rs 5,000. The fund expects to collect Rs 75 crore.

G. Pradeepkumar, Chief Executive Officer, Union KBC, said often investors keep a tab of NAV on a daily basis but miss on opportunity to book profits.

Capital gain tax

“We have attempted to protect small investors’ interest by fixing a predetermined trigger for redemption. It should be noted that, if the trigger is achieved in a year’s time then investors will attract short-term capital gain tax,” he said.

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.

The scheme will invest in a portfolio of equity and equity related securities, predominantly constituted of companies in BSE 200 index, besides debt and money market instruments.

“The valuation in equity market looks attractive now and we may find ample opportunity till December given the depressing corporate results and uncertainty in global market,” he said.

Things may start looking up from January as the December quarter is generally considered the best quarter for companies after a busy festive season. A better harvest and clarity on the US debt crisis will further boost sentiments early next year, he added.

> suresh.iyengar@thehindu.co.in

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