ET Explainer: Understanding new fund offers and how to invest in them
WHAT IS A NEW FUND OFFER?
A new fund offer, or NFO, is a limited-time subscription call when an asset management company launches a new scheme. The fund house offers an NFO for a category where it is not present to widen its offerings. For example, if an AMC does not have a large-and-midcap fund or a multicap fund, it launches an NFO for them. It is priced at ₹10 per unit. Since the NFO is for an open-ended product, the scheme will reopen for subscription after the NFO period ends, and units are allotted at the prevailing net asset value (NAV).
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
View Details» <div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-112851678»>HOW IS A MUTUAL FUND NFO DIFFERENT FROM AN EQUITY IPO?
Corporates seeking capital for expansion or private equity funds who need an exit take the equity IPO route to raise money. If it is an offer for sale, money goes to the investors making the sale else it is used as growth capital by the company. IPOs are generally made by privately owned companies looking to become publicly traded. A mutual fund NFO, on the other hand, merely collects money from investors and builds a portfolio (stocks/ bonds/government securities), based on a stated strategy. For example, it could be a large cap, midcap, or a multicap fund. Nowadays, shares in an IPO are offered at a premium and rarely at face value. But, an NFO from a mutual fund is always available at ₹10. Unlike an oversubscribed IPO where an investor may or may not get an allotment, there is a confirmed allotment in a
