NFO Pick – (Union Low Duration Fund)

30 Jun 2025 , 10:01 AM

WHY INVEST IN LOW DURATION FUND?

Before investing in the Union Low Duration Fund, the question is why a low duration fund at this juncture? There has been a widening of spreads between higher maturity and lower maturity as well as between lower risk and higher risk asset classes. It is expected that these should not get back to normal levels due to surplus liquidity in the system. That should lead to narrowing of these spreads, which will be favourable for bonds with relatively lower duration. With the RBI dividend payout and the CRR cuts, liquidity is likely to stay in surplus for some more time, favouring bonds in the lower duration brackets.

HOW LOW DURATION FUNDS PERFORMED

There are a total of 22 active Low Duration Funds in India, managing a combined corpus of ₹1,29,798 Crore. The table presents the top 10 on 1-year returns of the Direct plan. Only funds with 1-year track record have been shown.

Scheme Name	Return (%) 3-Months	Return (%) 6-Months	Return (%) 1-Year	Daily AUM (₹ in Crore)
HSBC Low Duration Fund	14.75	11.82	9.87	636.86
Kotak Low Duration Fund	10.29	9.18	8.72	13,006.16
Sundaram Low Duration Fund	9.71	8.92	8.64	369.77
HDFC Low Duration Fund	10.31	9.21	8.61	22,621.17
Nippon India Low Duration Fund	9.96	9.03	8.61	7,960.58
Mirae Asset Low Duration Fund	9.90	9.11	8.57	1,562.27
Axis Treasury Advantage Fund	10.01	9.07	8.57	5,446.11
ICICI Prudential Savings Fund	9.99	9.00	8.51	25,266.17
Mahindra Manulife Low Duration Fund	9.66	8.91	8.50	640.31
Aditya Birla Sun Life Low Duration Fund	9.99	8.96	8.48	12,106.28
Data Source: AMFI

 

If you take a 3-Months perspective, low duration funds delivered average returns of 10.05%, with a wide range. However, if you consider a 6-Months perspective, then these funds have delivered average returns of 9.09%. On a 1-year basis, average returns are 8.52%, although the dispersion is very low in this case. These are attractive returns considering they are low

GLANCE AT THE UNION LOW DURATION FUND NFO

Here are key details of the Union Low Duration Fund NFO.

• The NFO opened on June 26, 2025 and closes on July 10, 2025. The objective of the fund is to generate income by investing in debt and money market instruments, such that the Macaulay Duration of the portfolio is between 6 months and 12 months.
• On the risk-o-meter, Union Low Duration Fund is classified as “Low to Moderate Risk,” due to its lower level of duration risk, but higher level of credit risk as it would also go down the credit curve to enhance yields.
• The Union Low Duration Fund will be best suited to investors who want to generate income over a shorter time frame with a holding period of 3 months to 12 months with attractive post-tax returns.
• Union Low Duration Fund offers Regular and Direct plans. It also offers Growth option and IDCW option to investors. Devesh Thacker and Paritosh Agrawal will be the designated fund managers for the fund.
• Minimum application amount in NFO is ₹1,000 and multiples of ₹1 thereof. Subsequent additional investments will be of minimum ₹1,000. The fund structure supports SIPs, SWPs, and STPs too.
• Being a low duration fund, there is no exit load on the fund. The fund performance will be benchmarked to the Nifty Low Duration Debt Index A-I.

Union Low Duration Fund is a debt fund for tax purposes. Hence there will be no concept of long term or short term capital gains in this regard. Any gains will be treated as other income in the year and taxed at the peak incremental rates applicable.