Asset management companies measure success by their Assets Under Management (AUM), prompting fund houses to continually seek funds from investors through existing schemes based on performance or by launching New Fund Offers (NFOs).

An NFO is a new mutual fund scheme introduced by an asset management or mutual fund company, allowing investors to subscribe to its units at ₹10 per unit during a limited subscription window, which, as per SEBI regulations, can last up to 30 days or close sooner. Once the NFO period ends, the fund begins investing in securities based on its stated objective and operates like any other mutual fund, with its Net Asset Value (NAV) fluctuating according to market conditions.

The primary purpose of an NFO is to provide investors with access to a product different from the current repertoire, offering opportunities to diversify and gain exposure to emerging trends, sectoral or thematic opportunities, or hybrid investment strategies that mix asset classes.

During a bull run, the number of NFOs launched in the market tends to increase as fund houses capitalize on investor interest. While NFOs present an investment opportunity, several misconceptions surround them:

NFOs And IPOs Are The Same

Both NFOs and IPOs raise funds from investors, but the similarity ends there. IPOs are launched by private companies wanting to raise funds through stock market listing for purposes such as business expansion, debt repayment, or providing an exit opportunity for private investors or promoters. Investors in IPOs purchase shares of a single company, aiming for listing gains or long-term participation in its growth.