NEW DELHI: Met by market regulators Sebi’s ban when launching new fund offerings, Investment funds Collection through fresh systems remained subdued at Rs 62,342 crore in 2022-23, down 42 per cent from the previous financial year.
However, a higher number of NFOs were founded in 2022-23 (FY23) compared to the previous year.
According to data compiled by , a total of 253 new programs were launched in FY23, significantly more than the 176 new fund offerings (NFOs) launched in 2021-22 Morningstar India.
In addition, AMCs have listed 12 NFOs in various categories so far in the current fiscal year, according to industry data.
Over the past fiscal year, fund managers have focused on passive funds and fixed-income categories such as fixed-term plans.
According to the data, a total of 182 open-end funds and 71 closed-end funds were launched in the 2022/23 financial year and these funds collectively raised Rs.62,342 crore.
In comparison, 176 NFOs were launched in 2021-22 and in total these funds were able to mobilize Rs 1,07,896 crore, while 84 new programs were launched in 2020-21 raising Rs 42,038 crore.
Typically, NFOs come about during a booming market when investor sentiment is high and optimistic. Stock market developments as well as positive investor sentiment led to higher fund mobilization by NFOs in the period 2021-22.
However, the NFO Experts believe FY23 collections were impacted by multiple factors, such as Sebi’s three-month ban on new program launches, highly volatile markets, FPI outflows and global factors.
Generally, an AMC introduces a new mutual fund program – NFO – to fill the gap in its product portfolio. Following Sebi’s categorization and rationalization of mutual fund systems in 2017, many AMCs merged existing mutual fund (MF) systems and formed NFOs.
Kaustubh Belapurkar, Director – Manager Research at Morningstar Investment Adviser India, advised investors to only invest in NFOs if they offer something unique and fill a gap in their existing portfolios. It’s best for most investors to continue investing in similar existing funds with solid track records.
Gopal Kavalireddi, head of research at FYERS, said that not all NFOs are the same and have their pros and cons for investing.
Introducing an innovative theme or strategy that is not currently available in the market may be well targeted and suitable for investors. However, an NFO does not have a track record to research and understand the underlying stocks. With only an investment objective and some general information, it is difficult for an investor to assess suitability. In addition, there are higher initial costs associated with marketing and launching an NFO, which would be funded from the pooled money, he said.
“Unlike an IPO of a particular stock, where only a certain amount of shares are offered and the price changes due to an imbalance between supply and demand, a mutual fund’s net asset value (NAV) per share does not change. Therefore, investors don’t have to do it. “In the NFO phase, people inevitably rush to apply and can wait for portfolio construction before making an investment decision,” he added.
In 2022–23, AMCs focused on variable NFOs in other scheme categories, particularly index funds, and in the debt-based schemes segment, mostly term plans.
The maximum number of funds (84) was launched in the index fund segment, which amassed Rs.6,004 crore, followed by term plans (71), which raised Rs.16,356 crore, and other ETFs (36), which raised Rs.3,216 crore.
In addition, 32 NFOs were launched in the equity category, while six new fund offerings were launched in the hybrid category.
However, a higher number of NFOs were founded in 2022-23 (FY23) compared to the previous year.
According to data compiled by , a total of 253 new programs were launched in FY23, significantly more than the 176 new fund offerings (NFOs) launched in 2021-22 Morningstar India.
In addition, AMCs have listed 12 NFOs in various categories so far in the current fiscal year, according to industry data.
Over the past fiscal year, fund managers have focused on passive funds and fixed-income categories such as fixed-term plans.
According to the data, a total of 182 open-end funds and 71 closed-end funds were launched in the 2022/23 financial year and these funds collectively raised Rs.62,342 crore.
In comparison, 176 NFOs were launched in 2021-22 and in total these funds were able to mobilize Rs 1,07,896 crore, while 84 new programs were launched in 2020-21 raising Rs 42,038 crore.
Typically, NFOs come about during a booming market when investor sentiment is high and optimistic. Stock market developments as well as positive investor sentiment led to higher fund mobilization by NFOs in the period 2021-22.
However, the NFO Experts believe FY23 collections were impacted by multiple factors, such as Sebi’s three-month ban on new program launches, highly volatile markets, FPI outflows and global factors.
Generally, an AMC introduces a new mutual fund program – NFO – to fill the gap in its product portfolio. Following Sebi’s categorization and rationalization of mutual fund systems in 2017, many AMCs merged existing mutual fund (MF) systems and formed NFOs.
Kaustubh Belapurkar, Director – Manager Research at Morningstar Investment Adviser India, advised investors to only invest in NFOs if they offer something unique and fill a gap in their existing portfolios. It’s best for most investors to continue investing in similar existing funds with solid track records.
Gopal Kavalireddi, head of research at FYERS, said that not all NFOs are the same and have their pros and cons for investing.
Introducing an innovative theme or strategy that is not currently available in the market may be well targeted and suitable for investors. However, an NFO does not have a track record to research and understand the underlying stocks. With only an investment objective and some general information, it is difficult for an investor to assess suitability. In addition, there are higher initial costs associated with marketing and launching an NFO, which would be funded from the pooled money, he said.
“Unlike an IPO of a particular stock, where only a certain amount of shares are offered and the price changes due to an imbalance between supply and demand, a mutual fund’s net asset value (NAV) per share does not change. Therefore, investors don’t have to do it. “In the NFO phase, people inevitably rush to apply and can wait for portfolio construction before making an investment decision,” he added.
In 2022–23, AMCs focused on variable NFOs in other scheme categories, particularly index funds, and in the debt-based schemes segment, mostly term plans.
The maximum number of funds (84) was launched in the index fund segment, which amassed Rs.6,004 crore, followed by term plans (71), which raised Rs.16,356 crore, and other ETFs (36), which raised Rs.3,216 crore.
In addition, 32 NFOs were launched in the equity category, while six new fund offerings were launched in the hybrid category.
