February 18, 2021
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Rush for NFOs amid buoyancy in markets
Equity mutual fund (MF) schemes, despite buoyancy in the markets, have seen sustained net redemption since July. & to stem outflows and boost asset mobilisation, the Rs 30-trillion asset management industry is making a beeline for new schemes.
Last week, documents for over 12 New Fund Offer were filed with the Sebi, taking the year-to-date count to 30. Experts say NFOs could be a good way to draw retail attention.
“Launching new funds is a way to attract money into equity mutual funds,” said the chief executive officer of a leading fund house.
In January, equity-oriented MF schemes logged net outflows of Rs 9,253 crore. Since July, investors have pulled out over Rs 42,200 crore from equity schemes, even as the Sensex rallied nearly 50 per cent.
The data from the Association of Mutual Funds in India (Amfi) shows between April and January, MFs mopped up over Rs 34,397 crore through NFOs, at an average of Rs 614 crore per issue.
Last month, the NFO of the ICICI Prudential Business Cycle Fund had raised Rs 4,185 crore.
The two NFOs Mirae Asset Management Company has filed are from the passive space. Both are differentiated products in the markets. It believes that a combination of both active as well as passive funds will lead to a superior portfolio for investors. The fund house is seeking Sebi approval to launch the Mirae Asset Global Nextgen Tech Fund of Fund and Mirae Asset US FANG Plus ETF.
Why MF Distributors are happy for NFOs ??
NFOs not only help asset managers garner new assets but also, given an opportunity, allow the distributor to pocket higher commissions. The fund houses pay around 80 basis points (100 basis points equal to 1 per cent) as trail commission to distributors. But for NFOs, the commissions are in the range 1.80-2 per cent.