A New Fund Offer (NFO) is a first-time subscription offer launched by Asset Management Companies (AMCs). Similar to IPOs (Initial Public Offers), they aim to raise capital from the public to buy shares, bonds and other financial instruments for the mutual fund scheme.
The objective of an NFO is to accumulate an adequate initial corpus so that the fund manager can build a portfolio based on an investment objective. Investors can purchase the fund units at a low subscription price, usually set at Rs. 10. NFOs are open for a limited period during which you can subscribe.
Here are the top upcoming New Fund Offers in 2022.
The following NFOs are open for subscription:
|Name of the NFO||Category||Issue Open Date||Issue Close Date|
|SBI Multicap Fund (Reg-G, Dir-G, Reg-IDCW, Dir-IDCW)||Equity (multi-cap)||14 February 2022||28 February 2022|
|Nippon India Fixed Horizon Fund XLIII- Sr 5||Debt (FMP)||25 February 2022||28 February 2022|
|Navi Nifty Midcap 150 Index Fund (Reg-G and Dir-G)||Equity (mid-cap)||21 February 2022||2 March 2022|
|Mirae Asset Nifty Midcap 150 ETF (Reg-G)||Equity (mid-cap)||24 February 2022||4 March 2022|
|Axis Nifty Smallcap 50 Index Fund (Reg-G, Dir-G, Reg-IDCW, Dir-IDCW)||Equity (small-cap)||21 February 2022||7 March 2022|
|ITI Conservative Hybrid Fund (Dir-G, Reg-G, Dir-IDCWQ, Reg-IDCWQ, Dir-IDCWY, Reg-IDCWY, Dir-IDCWH, Reg-IDCWH)||Hybrid (conservative)||21 February 2022||7 March 2022|
|JM Corporate Bond Fund (Dir-G, Reg-G, Dir-IDCW, Reg-IDCW)||Debt (corporate bond)||24 February 2022||7 March 2022|
|ICICI Pru 5 Year G-Sec ETF-G||Debt (gilt)||4 March 2022||7 March 2022|
|Edelweiss CRISIL PSU Plus SDL 50:50 Oct 2025 Index Fund (Dir-G, Reg-G)||Debt (medium duration)||3 March 2022||8 March 2022|
|HDFC FMP 1861D March 2022 (Dir-G, Reg-G)||Debt (FMP)||4 March 2022||8 March 2022|
|Navi NASDAQ 100 FoF (Dir-G, Reg-G)||Equity (international)||3 March 2022||14 March 2022|
|Navi Nifty IT Index Fund (Dir-G, Reg-G)||Equity (Sectoral, IT)||3 March 2022||14 March 2022|
|Motilal Oswal S&P BSE Low Volatility Index Fund (Dir-G, Reg-G)||Equity (large-cap)||4 March 2022||16 March 2022|
|Motilal Oswal S&P BSE Low Volatility ETF (Reg-G)||Equity (large-cap)||4 March 2022||16 March 2022|
|Axis Nifty Midcap 50 Index Fund (Dir-G, Reg-G, Reg-IDCW)||Equity (mid-cap)||10 March 2022||21 March 2022|
Fund houses launch NFOs to raise capital from public investors. As per SEBI regulations, NFOs cannot stay open for more than 15 days. New mutual fund offers for equity funds typically stay open for 15 days, while NFOs for debt funds stay open for around 3-4 days.
During this period, investors can subscribe to the NFO at the offer price. The AMC has to collect a minimum corpus of Rs. 20 crore for debt-oriented and balanced hybrid funds Rs. 10 crore is required for other schemes. Previously, a fund house had to invest at least 1% of the money raised or Rs. 50 lakh in the scheme. That said, SEBI has asked AMCs to increase the investment amount based on the scheme’s risk level.
Once the NFO closes, the fund house allots units of the new scheme within 5 days. If you do not get an allotment, they will refund your application money. After this, investors can purchase fund units at their Net Asset Value (NAV), provided that it is an open-ended scheme.
Most mutual funds are open-ended, meaning that investors can buy/sell fund units during and after the NFO period. The number of units of these mutual funds varies with an increase/decrease in demand. Investors can procure units of these funds even before the determination of their NAV, allowing them to gain profits over a long time.
Let us say that Mr. Singh invested Rs. 5,000 in an NFO, purchasing 500 units. Upon the end of the NFO period, the NAV stands at Rs. 15 per unit. If he sells all units of the mutual fund, he will gain Rs. 2,500 (Rs. 7500 – Rs. 5000).
These mutual funds have a fixed number of units at the launch of a new fund offer. After the end of the NFO period, no new investor can enter, while existing investors cannot exit their investment. The tenure for these investments is usually 3-4 years.
NAV of such a fund is determined based on the market value of underlying assets and the total number of units. Close-ended mutual funds prevent sudden outflows from the mutual fund and allow fund managers to make sound financial decisions.
Let us consider the example of Mr. Patel, who has purchased 500 units of a close-ended fund at Rs. 10 each. After the end of the NFO period, its NAV is Rs. 12. However, since he cannot redeem the units from the AMC, he has to sell them on stock exchanges.
If the fund units are trading at Rs. 12 per unit, she can profit Rs. 1,000 (Rs. 6,000 – 5,000). If they are trading at Rs. 9 per unit, she will incur a loss of Rs. 500 (Rs. 5,000 – 4,500).
Many investors consider NFOs a good investment opportunity. Here are the reasons:
Many upcoming new fund offers will allow you the opportunity to invest in new and innovative investment strategies. While some offer new themes and investment strategies, others focus on different asset classes, recent IPOs, commodities etc.
Close-ended mutual fund schemes are only available for subscription via NFOs. These offer fund managers the chance to invest with a relatively long investment horizon and explore different financial instruments without the worries of redemption pressures.
NFOs come with an entry price of Rs. 10, but after the subscription period, their NAV mainly scales up. With open-ended NFOs, you can sweep off the gains made as per your financial goals.
NFOs come with a lock-in period during which you cannot redeem the units. The fund makes more financial gains as it matures, allowing investors to achieve their financial goals without withdrawing funds prematurely.
Navi has a number of upcoming new fund offers in 2022, including the Navi Nifty Midcap 150 Index Fund. This will provide investors with the chance to invest in the emerging companies of the country. Investors can find this scheme on multiple online platforms such as Groww, Zerodha and INDmoney.
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
The upcoming new fund offers in 2022 will allow you to invest in new strategies and close-ended funds that are usually out of reach via existing options. They also come at a low price as these funds are relatively new. Investors should assess various factors such as their risk appetite, cost of investment, and reputation of the fund manager to get the best out of such offers.
No, while both involve raising money from the public, they are quite different in nature. IPOs involve selling a company’s shares to the public as fresh issuance or an offer for sale (OFS). On the other hand, NFOs are new mutual funds with no limits for how much they can raise.
As per SEBI regulations, mutual fund houses cannot open any number of new mutual fund offers. An AMC can open only one NFO in a single category and new ones only when an existing offer is closed. Thematic funds are an exception, as AMCs can launch multiple schemes provided that they have a different theme.
All fund houses have to follow the 20-25 rule for new schemes. According to this, a mutual fund scheme must collect funds from at least 20 investors. The other part of the rule involves no investor having invested over 25% in a scheme.
The fund manager is the orchestrator of a mutual fund, and his/her expertise, experience and management skills affect a fund’s performance. You will want to check if the fund manager has outperformed the market over a long period of time. You will also want to assess if he is capable of managing risks well.
You should check the following information in the scheme related document:
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