after an interval of 3 months; Mutual fund NFO jump in July
New Delhi:
After a gap of three months, new fund offerings (NFOs) have made a strong comeback, with asset management companies launching over two dozen mutual fund schemes in July.
New funds have been launched across the board – actively managed equity funds, debt, index funds and exchange traded funds (ETFs). Interestingly, passively managed funds, especially ETFs, dominate the NFO market.
In April, there was a lull in the NFO space as the Securities and Exchange Board of India (SEBI) barred fund houses from running fresh schemes unless the industry adheres to its norms relating to pooling of investors’ funds by middlemen and distributors. used to do.
The deadline for implementing the new guideline was July 1.
Also, the regulator had asked fund houses to implement guidelines like double authentication for redemption and verification of source of accounts while making mutual fund investments.
These measures are aimed at protecting the interests of investors and increasing investor confidence in mutual fund investments.
According to industry data, 18 asset management companies (AMCs) launched 28 mutual fund schemes in July. Out of 28 NFOs, 24 are in progress and the remaining four have been closed.
The NFOs that are trending include ICICI Prudential Nifty IT Index Fund, Aditya Birla Sun Life Nifty 200 Quality 30 ETF, Baroda BNP Paribas Flexi Cap Fund, Canara Robeco Banking and PSU Debt Fund.
Apart from this, DSP Nifty Midcap 150 Quality 50 Index Fund, HDFC Nifty 100 ETF, Motilal Oswal S&P BSE Quality Index Fund, IDFC Midcap Fund, Mirae Asset Balanced Advantage Fund, Quantum Nifty 50 ETF Fund of Fund, Union Gilt Fund and Large Quant Cap Fund continues.
In addition, half a dozen NFOs, including Franklin Templeton MF, which is running a new scheme after a gap of two and a half years, are slated for next month.
Amar Ranu, head of investment products and advisory at Anand Rathi Shares & Stock Brokers, said most of the recently launched NFOs had applied for approval from the capital markets regulator long before the 3-month ban.
“Now there is a huge rush among AMCs to fill their passive index fund or ETF buckets, and they don’t want to lose their passive stake to the fund’s absence,” he said.
Further, he said the lack of alpha generation by actively managed funds on the benchmark is leading to sophisticated or institutional investors shifting part of their portfolios to passively managed funds.
Himanshu Srivastava, Associate Director- Manager Research, Morningstar India, observed that there has been an increased interest in ETFs from investors and fund houses.
Several ETFs have been launched over the years, and some of these NFOs are either sector-oriented or have a thematic twist.
Furthermore, Mr. Ranu believes that factor investing is growing very rapidly in India, which has had some success with the existing Nifty 200 Momentum 30 Index Fund, which has gained a lot of support from the management (AUM) due to the unique positioning of the product. Under some quick assets have been collected.
AMCs are trying to complement their product basket and launch funds as per their requirement.
In many cases, NFO launches are likely to happen where existing fund houses are completing their product suite by adding categories where they do not have a presence; Vishal Dhawan, board member of the Association of Registered Investment Advisors, said.
He added that NFOs are also being launched where interest rates are being locked because the returns have gone up or where there are new fund houses which can now launch their schemes.
NFOs lead to good investor participation and increase the activity of distributors.
The SEBI decree impacted the launch of new schemes as only four NFOs launched till June in the current fiscal 2022-23 raised a total of Rs 3,307 crore, with ICICI Prudential Housing Opportunities Fund taking the bulk of Rs 3,159 crore.
In 2021-22, AMCs launched 176 new mutual fund schemes worth Rs 1.08 lakh crore – which meant less than 15 months on an average. 84 NFOs issued in 2020-21; In all, these funds can raise Rs 42,038 crore.
Nitin Rao, Head Products & Proposals, Epsilon Money Mart, said that as we move forward, there will be many new fund launches in the debt and equity space with passive strategies.
“Furthermore, we will continue to see growth in fixed income passive funds and long term or long duration debt funds, as rates move up and could provide attractive opportunities for investors,” said Radhika Gupta, MD and CEO, Edelweiss AMC.
Association of Registered Investment Advisors Dhawan suggests that investors consider new mutual fund schemes where there are limited options available in those categories of mutual funds or if one offers a particularly specific NFO.
Once the track record is created, new schemes can be considered.