As the July 1 deadline approaches, mutual funds are lining up to start NFOs

view original post

As the July 1 deadline for no longer using pool accounts approaches, the introduction of new fund offers (NFOs), which had been suspended for a few months, is expected to resume. According to industry insiders, the Securities and Exchange Board of India (SEBI) would approve NFOs once the Association of Mutual Funds in India has given final approval that the new processes are in place.

Meanwhile, mutual fund firms have begun planning their NFOs for when the embargo is lifted. Five investment houses registered for new funds with SEBI last week. Sundaram MF has applied for a flexicap fund, Baroda BNP Paribas MF has applied for a floater fund, LIC MF has applied for a multi-cap fund, Franklin Templeton MF has applied for a Balanced Advantage Fund, and Axis MF has applied for a long-term fund.

PGIM India Mutual Fund registered for a concentrated equities fund earlier this month. Several new fund houses were looking forward to this deadline so they could resume establishing their funds. Navi MF, White Oak MF, Samco MF, and NJ MF are among those supported by Flipkart co-founder Sachin Bansal.

According to industry sources, SEBI has already begun issuing remarks on NFO filings. The mutual fund sector had previously guaranteed SEBI that no new funds would be launched until the new framework was in place. The sector had requested an extension after missing the March 31 deadline.

SEBI has ordered mutual fund firms to make sure that no mutual fund distributor, online platform, stockbroker, or investment advisor accumulates money from investors in a bank account and then transfers it to the fund house to buy units in schemes for those investors. This is to guarantee that the funds are not misappropriated.

NFO Run

In terms of NFO receipts, the mutual fund sector enjoyed one of its best years last year. NFOs alone brought in roughly Rs 96,000 crore in investment flows for the industry. Several of the new funds were index funds or exchange-traded funds (ETFs) that had a theme or sector emphasis. The only categories where SEBI’s one scheme per category rule does not apply are indexes and ETFs.

Despite the fact that new fund launches will resume, financial advisers advise clients to avoid investing in too many NFOs and instead stick to established funds with a proven track record.

“Typically, 8-10 funds are sufficient to meet your investing needs while also diversifying your portfolio. According to Nisreen Mamaji, founder of MoneyWorks Financial Services, “the core portfolio should ideally comprise a blend of big, mid, and small-cap funds, as well as a handful of debt funds.” “Sector or theme-based funds can be included in your satellite portfolio, but only in small amounts,” she noted.