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High growth in the mutual fund industry assets, a growing number of investors and the entry of new fund houses have led to several new fund offers (NFOs). Existing fund houses launch new products in categories where they do not have a presence while new ones are keen to enhance their product in themes that they currently find attractive. WHAT IS A NEW FUND OFFER (NFO)? A new fund offer (NFO) is a first-time subscription offer for a scheme, from a fund house.
The fund house launches an NFO for a category where a product is missing or to increase its basket of offerings. For example, if an AMC does not have a product in the multi-asset category, one which combines different asset classes like equity, gold and fixed income, it will launch an NFO. The NFO is priced at ₹10 per unit.
Since the NFO is for an open-ended product, the scheme will reopen for subscriptions once the NFO period ends and allotments will be made at the prevailing net asset value (NAV). Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » HOW SHOULD INVESTORS EVALUATE AN NFO? Given the many NFOs launched, it becomes difficult for a retail investor to decide which one to invest in.
Since fund houses are allowed one scheme per category and large fund houses have exhausted their regular categories, they are launching NFOs in narrow themes, quantbased schemes, sectoral themes and ETFs. There is high decibel marketing around NFOs. Financial planners say investors should build a long-term portfolio, which includes assets like gold, fixed income and equities based on their needs, risk tolerance and goals.
If an NFO meets the needs of their portfolio, then they can consider it. Avoid NFOs merely because it is available at an NAV of ₹10. Besides, there is no urgency to rush into any NFO.
Investors can wait to evaluate the scheme’s portfolio and then take a call. HOW IS AN EQUITY IPO DIFFERENT FROM THAT OF A FUND HOUSE NFO? Leadership Business Storytelling Masterclass By - Ameen Haque, Founder of Storywallahs View Program Finance Startup Fundraising: Essential Tactics for Securing Capital By - Dr. Anu Khanchandani, Startup Coach with more than 25 years of experience View Program Data Science SQL Server Bootcamp 2024: Transform from Beginner to Pro By - Metla Sudha Sekhar, IT Specialist and Developer View Program Web Development Java 21 Essentials for Beginners: Build Strong Programming Foundations By - Metla Sudha Sekhar, IT Specialist and Developer View Program Finance A2Z Of Money By - elearnmarkets, Financial Education by StockEdge View Program Marketing Future of Marketing & Branding Masterclass By - Dr.
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It could be a large-cap, mid-cap, multi-asset strategy and so on. IPOs nowadays are rarely done at face value with most of them commanding a premium. On the other hand, an NFO is always available at ₹10.
Unlike an IPO which gets oversubscribed and an investor may not get the desired allotment of shares, there is full and confirmed allotment in an NFO..
