Equity new fund offerings (NFOs) are back on the radar after a long lull with quite a few fund houses launching equity NFOs in the last 4-5 months.
The year 2014 has, so far, seen the launch of 18 closed-ended funds and 12 open-ended funds, data collated from Value Research show. The total amount collected from NFOs this year has crossed Rs 3,000 crore. This number was less than R1,000 crore for the whole of last year.
?With the market seeing an uptick in the last 6-7 months, investors have started warming up to new fund offerings launched by fund houses. Also, with a stable government in place, the pace of NFO launches may increase in the coming months,? said Nilesh Sathe, CEO, LIC Nomura MF. According to Sameer Hassija, senior investment consultant, Morningstar India, this is a typical trend that has played out in the past: ?Whenever the market sees an upsurge, fund houses launch new funds.?
Closed-ended funds, in particular, have gained popularity since September last year, with several top fund houses, such as ICICI MF and Reliance MF, launching such schemes. Three closed-ended schemes are currently open for subscription.
Hassija believes that in the coming months, fund houses may try to come out with funds with cyclical themes, which may include banking sector funds, industrial funds and infra funds.
Some experts believe that while investors have historically shown a preference for investing in new schemes with a NAV of R10, they should look at existing schemes with a track record since the market is on an upswing. ?Investors should invest in funds with proven track record and ones that are fully invested rather than opt for a NFO, which may take 1-2 months to deploy the entire NFO money into the equity market and thus lose out on the rally,? said Aashish Somaiyaa, CEO, Motilal Oswal AMC.
The number of new equity fund launches and the amount mobilised by them have been on a decline since 2009, the year Sebi put a ban on entry load. In 2011, only 10 new equity funds were launched that managed to mop up about Rs 612 crore. In both 2009 and 2010, equity NFOs had mobilised over R4,500 crore, while in 2006,2007 and 2008, the mobilisation amount stood at more than Rs 20,000 crore in each of the three years.
