Mutual fund NFOs hit by COVID19 pandemic; new launches postponed

In March, Sebi received just a single New Fund Offer (NFO) filing request, from Nippon India Mutual Fund. A month later, in May, SBI Mutual Fund filed for two NFOs. Interestingly, both these requests were for passive funds. The Coronavirus pandemic has hit the number of NFO requests from fund houses since January this year. There were 11 NFO filings in January, which fell to 6 in the March and to 2 in May.

According to mutual fund participants, fund houses have put on hold their plans to launch new products due to the coronavirus pandemic. As coronavirus spread beyond continents and in India, the stock markets across the world started to fall. The S&P BSE Sensex has seen massive volatility in the last two months. Due to this volatility and uncertainty about the future, the fund houses are not hurrying up with their NFOs anytime soon.

Mutual fund participants say that fund houses don’t see any certainty for the future and want to delay new launches. In some cases, fund houses have received approvals for NFOs but the plans of launch have been put on the backburner.


“It takes a lot to launch a new scheme. The event, the distribution, and fund raising etc is a huge process that cannot be smoothly done in a lockdown. Moreover, the sentiment needs to be right for a fund launch,” says an official in a large private sector mutual fund, who doesn't want to be quoted.

Mutual fund advisors believe that this is not a great time to come up with new schemes. “In a situation when established schemes are seeing redemption and investors are facing salary cuts, NFOs don’t make much sense. That is the primary reason for fund houses to have stopped launches and filing of new products. This has been a trend whenever the market has fallen majorly,” says Chokkalingam Palaniappan, founder, Prakala Wealth Management.

Chokkalingam also believes that the investors want to be as safe as possible at the moment. “When active schemes have taken a beating, index funds and passive schemes are seen as safer options in equity.” This is the reason why in the last three months, most of the new fund filings have been passive schemes. 6 out of the 9 NFO flings are passive funds. Here’s a list of filings that Sebi received from February to May:

Date of filing	Scheme name
May 04, 2020	SBI ETF Consumption
May 04, 2020	SBI ETF Private Bank
Mar 06, 2020	Nippon India ETF 5 Year Gilt
Feb 18, 2020	Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund
Feb 17, 2020	DSP ESG FUND
Feb 17, 2020	HSBC Focused Equity Fund
Feb 12, 2020	Aditya Birla Sun Life Nifty Midcap 150 Index Fund
Feb 12, 2020	Aditya Birla Sun Life Nifty Smallcap 50 Index Fund
Feb 03, 2020	Aditya Birla Sun Life ESG Fund