In 2022 so far, 57 new schemes have been launched, including active, passive, open and close-ended funds. These NFOs amassed inflows worth Rs 21,464 crore. In the last two months of May and June, no new schemes were launched because the Securities and Exchange Board of India (Sebi) had discontinued the launch of NFOs until the new systems concerning pool accounts were determined and the regulator had set July 1 as the deadline for the implementation of the new system.
“There are many new NFOs, many are already launched and are in the New Offer period, and there are many others that are scheduled to launch in the next 4-6 weeks. The reason we are seeing a large number of NFOs in the current scenario is because there was an embargo on NFOs which has been lifted effective 1 July 2022. Many AMCs are now launching NFOs after this lull period, to fill in the gaps in their offerings and also to take advantage of the recent market correction. For example, there is one fund house doing a focused fund and another fund house doing a flexi fund or a multicap and so on. All of them will try to maximize their opportunity to launch a fund. A new fund offer gives that extra nudge in sales or opportunity for distribution,” says Santosh Joseph, Founder, Germinate Wealth Solutions, based in Bangaluru.
Here are the open-ended NFOs that are currently open for subscription:
In the last two years, many NFOs have been really successful, garnering big flows in the NFO period itself. The rise in the fame and success of NFOs was attributed to new investment styles which did not exist in the market and also to bigger distribution push in wake of a rising market.
To name a few winners, NFOs of schemes like SBI Balanced Advantage Fund amassed Rs 14,551 crore in their NFO period. ICICI Prudential’s Flexicap Fund NFO garnered Rs 10,063.81 during its NFO period. Even new and smaller fund houses joined the party. NJ Mutual Fund’s Balanced Advantage Fund garnered Rs 5,200 crore in the NFO period. Mutual fund advisors believe that retail investors should not jump into the NFO frenzy.
“Just because it’s an NFO doesn’t mean investors should jump in. Most AMCs launch funds all the time to fill their basket and attract investors as per the latest trends. Investors should not fall for these traps. Usually one should wait for a few years to see how the fund is performing before investing in it. If there are existing similar funds with consistent and proven track record, I don’t see a need to invest in an NFO unless and until it is a unique strategy and theme with back tested data and that too backed by an experienced/seasoned and well known AMC, fund manager and its core investment team,” says Rushabh Desai, Founder, Rupee With Rushabh Investment Services, based in Mumbai.
Desai also busts a very popular myth about NFOs being cheaper than older funds. “A lot of investors think investing at Rs.10 NAV is buying at a low price. This is a myth. Ultimately you need to look at the market prices and valuations to see if the NFO is investing at low or high levels. Rs 10 a unit doesn’t mean anything,” says Rushbah Desai.
Mutual fund advisors maintain that retail investors should go for NFO only in exceptional circumstances. “For an investor, you consider an NFO only if you feel that that particular product by a new AMC is applicable for you. Just because it’s an NFO, there is no hard and fast rule that they have to apply for any of these because many of them have an existing peer group which has got a track record, history of performance and an active portfolio,” says Santosh Joseph.