Union MF Launches New NFO Blending Arbitrage & Debt for Tax-Efficient Income – Should You Invest?

The NFO is a newly launched open-ended Union Income Plus Arbitrage Active FOF - Dir (G) by Union Mutual Fund aimed at investors seeking medium- to long-term income with an emphasis on tax efficiency. This fund tactically allocates investments between arbitrage and debt-oriented mutual fund Union Income Plus Arbitrage Active FOF - Dir (G), providing a simplified structure for diversified income. With the benefit of equity-like taxation (12.5% LTCG if held over 24 months), this NFO caters to those looking to avoid the complexities of managing multiple portfolios while still capitalising on income-generation opportunities amid a declining interest rate environment. Professional fund management and strategic asset allocation make it a compelling alternative to traditional debt products.

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The Union Income Plus Arbitrage Active FOF - Dir (G) is gaining attention as the best NFO to invest in June 2025 for those seeking a balanced approach to returns. It is designed as one of the most promising tax-efficient mutual funds in India 2025, blending arbitrage and debt strategies. With its dynamic allocation, it offers a compelling comparison in the arbitrage fund vs debt fund debate. Among the top mutual fund NFOs for stable income, this fund stands out for its simplicity and long-term tax benefits.

Key Features of Union Income Plus Arbitrage Active FOF

• Opening Date: 22nd May 2025
• Closing Date: 5th June 2025
• Scheme Type: Open-ended Fund of Fund (Domestic)
• Exit Load: Nil
• Minimum Investment Amount: ₹1,000 and in multiples thereof
• Fund Manager(s): Vishal Thakker
• Debt: Anindya Sarkar and Shrenuj Parekh
• Reopens for Ongoing Subscription: Within 5 business days from the date of allotment

What Are the Objectives of Union Income Plus Arbitrage Active FOF?

The NFO aims to deliver regular income over the medium to long term by investing primarily in arbitrage units and a debt mutual fund, Union Income Plus Arbitrage Active FOF - Dir (G). While there is no assurance of guaranteed returns, the scheme is structured to offer tax efficiency and diversification, providing investors with a low-volatility income stream that benefits from dynamic market allocation and equity-like tax treatment if held beyond two years.

Investment Strategy of Union Income Plus Arbitrage Active FOF

• Invests dynamically between arbitrage strategies and debt-oriented mutual funds.
• Allocation can go up to 65% towards arbitrage or debt funds based on prevailing market conditions.
• Blended structure offers exposure to multiple Union Income Plus Arbitrage Active FOF - Dir (G) under a single NAV.
• Focuses on delivering tax-efficient income through optimal fund selection.
• Portfolio actively managed to benefit from falling interest rates and market volatility.

Risks Associated with Union Income Plus Arbitrage Active FOF

• Subject to market volatility from arbitrage opportunities, which may not always be favourable.
• Exposure to interest rate risk due to the debt component, especially if interest rates rise.
• Liquidity risks in underlying mutual fund investments could affect performance.
• Taxation assumptions are subject to regulatory change and may impact long-term benefits.
• Returns are not guaranteed, and fund performance depends on the expertise of fund managers.

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Risk Mitigation Strategy by Union Income Plus Arbitrage Active FOF

The NFO mitigates risks by maintaining a balanced portfolio between arbitrage and debt mutual funds, ensuring reduced exposure to extreme market fluctuations. The arbitrage component cushions equity volatility while the debt portion provides steady income. The fund’s dynamic allocation model enables swift adjustment to market conditions, optimising returns and mitigating downside risks. Professional fund managers continuously monitor market trends, rebalancing the portfolio to maintain an optimal risk-reward ratio. Additionally, using a fund-of-fund approach simplifies diversification and lowers individual fund concentration risk.

What Type of Investor Should Invest in Union Income Plus Arbitrage Active FOF?

• Investors seeking tax-efficient income in the medium to long term.
• Individuals prefer passive exposure to arbitrage and debt without managing multiple schemes.
• Those looking for an alternative to traditional debt funds amid falling interest rates.
• Investors are aiming for equity-like tax treatment on income-generating instruments.
• Suitable for moderate-risk investors who prioritise steady returns over high volatility.