Context:
India’s market regulator, the Securities and Exchange Board of India (Sebi), has intensified scrutiny of New Fund Offers (NFOs) to check portfolio overlap with existing mutual fund schemes, even though its draft proposals on the issue are yet to be formally notified.
What is an NFO?
A New Fund Offer (NFO) is the initial launch of a mutual fund scheme by an Asset Management Company (AMC), during which investors can subscribe to units at a fixed offer price (usually ₹10 per unit). NFOs are regulated by the Securities and Exchange Board of India (SEBI).
Key Characteristics
- Offer period: Open for subscription for a limited time
- Unit price: Generally fixed at launch (e.g., ₹10)
- Post-NFO: Units are allotted and the scheme becomes open-ended (if applicable)
- Disclosure: Scheme Information Document (SID) and Key Information Memorandum (KIM) must be provided
Types of NFOs
- Open-ended NFOs
- Can be bought/sold anytime after launch
- NAV-based transactions
- Close-ended NFOs
- Fixed maturity period
- Listed on stock exchanges
- By investment style
- Equity (large-cap, mid-cap, thematic/sectoral)
- Debt
- Hybrid
- Passive (index funds, ETFs)
