Amid flood of NFOs, experts advise caution

Mumbai: Mutual funds have flooded the market with fresh offerings with as many as 14 schemes set to be launched over the next fortnight. While distributors push these products to investors amid high-decibel marketing by fund houses, many investment advisers are asking clients to stay away unless the new product fills the gap in their investment portfolios.

As per data from Value Research, so far in this calendar year, mutual funds have launched 139 new fund offers, collecting ₹76,251 crore. The majority of the new products have been in the equity and hybrid spaces with these two categories mobilising ₹41,702 crore and ₹22,320 crore, respectively.

The latest set of fund offerings are from large asset managers such as HDFC Mutual, ICICI Prudential Mutual, Aditya Birla Sun Life and Axis Mutual among others. Out of these launches, three are in the multi-cap space, three are index funds and five are international products. The rest are thematic offering, a financial services fund offering, value fund and quant fund.


Wealth advisors said mutual funds are looking to divert a portion of the domestic money that is betting on the stock market into some of these products.

"With equity markets at an all-time high, it is natural to see fundraising which includes new fund offers (NFOs) and IPOs," said Yuvraj Thakker, MD, BP Wealth. With equities being the best performing asset class over the last 20 months, fund houses are using the opportunity to garner assets through several new and differentiated launches. For distributors, fund launches result in extra commission.

"It is imperative for a fund house to get more NFOs as it widens its product basket and helps gain market share, but it is not at all necessary for retail investors to subscribe to these products unless there is a need in the portfolio," said Amol Joshi, founder, Plan Rupee.

A flood of money was awaiting the launch of Invesco Mutual Fund's blockchain fund in India - the first of its kind here. The fund house, however, put it on hold due to uncertainties around rules on cryptocurrency investments.