Mutual fund companies or houses often launch new mutual fund schemes with their own set portfolio and market view. These new mutual funds when first launched are called NFOs or New Fund Offerings. In general, mutual funds allow retail investors to avail the best industry practices in finance and thereby enjoy far higher returns than those offered by savings or fixed deposits without much effort.
In this article, alongside explaining what NFO mutual funds are, we have listed some of the new upcoming NFO in mutual funds that will open for subscription in March 2023.
What is NFO?
An NFO is a new scheme started by a mutual fund house to raise funds to buy securities. The money raised from investors by launching an NFO is used to buy investment securities from the market.
Like an IPO, an NFO is a fresh offer made by the Asset Management Company on a subscription basis. However, NFOs are are often designed to cater to a very specific group of investors who have an interest in a particular type of portfolio that the fund is offering. As a result, upcoming NFOs in mutual funds are not as much in the news as IPOs are.
NFOs are offered for a limited period of time called the offer period. Investors buy major chunks in the new mutual fund during this period.
Types of NFOs
Mutual funds are usually of two types, based on the level of flexibility for investors – open-ended funds and close-ended funds.
Open-ended funds – An open-ended mutual fund announces buying new shares on a specific date. For open-ended mutual funds, the units can be bought during a new fund offering or even after. Usually, for open-ended funds, the number of units is not restricted, and investors can buy or sell (redeem) them through brokerage firms.
For open-ended funds, daily reports on the Net Asset Value of the fund are released by the fund house.
Close-ended funds – Units of a closed-ended fund can be bought only during its launch and redeemed only when its tenure of investment is over.
Upcoming NFO mutual funds in March 2023
The names of the NFO mutual funds in March 2023 are given below.
|Name of the company||ISIN No.||Date of offer close|
|IDFC US Treasury Bond 0 1 year Fund of Fund (G)||INF194KB1FT6||23 March, 2023|
|JM Corporate Bond Fund (G)||INF192K01MY0||20 March, 2023|
|HSBC CRISIL IBX Gilt June 2027 Index Fund (G)||INF336L01QW6||20 March, 2023|
|UTI Long Duration Fund (G)||INF789F1AXS1||15 March, 2023|
|Navi ELSS Tax Saver Nifty 50 Index Fund (G)||INF959L01GS4||15 March, 2023|
|Aditya Birla Sun Life CRISIL IBX Gilt April 2028 Index Fund (G)||INF209KB19T7||14 March, 2023|
Advantages of investing in NFOs
- Diversification – Investing in a new fund adds to your portfolio and therefore decreases the risk of losing a large part of your capital at once due to a single event.
- Opportunity to explore a new fund – New funds are launched keeping the most recent market, technological and cultural trends in mind and hence are a great opportunity to prepare your portfolio for the future.
- Flexibility – NFO mutual funds offer an opportunity for creativity and flexibility to fund managers to select securities in the market. They can improve on past mistakes and incorporate past learnings into their view.
- Lock-in – Since NFO funds come with minimum lock-in, they give the freedom to fund managers to utilise the period to take risks and also to withdraw from the market sensing excess risk too.
Disadvantages of investing in NFOs
- No track records – There is no historical data to use in order to assess the performance of the fund before investing. Therefore, investors must rely on the prospectus published by the fund house in order to make the investment decision.
- High expense – A new fund may cost comparatively higher than an old fund. It is because of both inflation as well as the increased sums spent on marketing and paying commissions to intermediaries.
- Growth factor – Unlike an IPO, where a fresh entry of capital into a firm helps towards raising the firm’s share price, an NFO does not increase the performance of the fund on its own as it is largely dependent on the abilities of the fund managers and the technology available with them.
You can consider investing in the NFO mutual funds open in March 2023 from the list above, once you have done adequate research on them. Explore more investment options across asset classes with Angel One if you want to diversify and expand your portfolio.
Disclaimer: This article has been written for educational purposes only. The securities mentioned are only examples and not recommendations.