Individual investors are no longer finding new fund offers (NFOs) of mutual funds enticing. Rising returns from existing funds, tighter regulatory norms and untested strategy have taken the sheen off new offerings. Till August this year, asset management companies (AMCs) have raised only R870 crore from 13 NFOs as compared to R12,200 crore from 74 offerings in 2014, data from Association of Mutual Funds of India show.
Fund houses launch equity NFOs when markets are on a roll. It is similar to initial public offerings (IPOs) of stocks where one buys the equity before it lists on the exchanges. The NFOs are offered for a limited period of time and investors get the prevailing net asset value.
However, before investing in any NFO, one must analyse the performance of earlier offerings of the AMC. Dhaval Kapadia, director, Investment Advisory, Morningstar Investment Adviser (India) says NFOs might provide exposure to a differentiated strategy/mandate (if any) vis-à-vis existing funds. “Of course, one needs to assess whether the investment strategy offered by a new fund is truly different as compared with the existing funds,” he says.
