New Fund offers in mutual funds are like IPO for shares, where the fund houses come up with an investment proposal and public can subscribe to it.
What are NFOs?
- An NFO or New Fund Offer is offered by Asset Management Company (AMC).
- It is an invitation to the investors to subscribe to the units of a newly launched fund.
- These are launched to introduce a new investment theme that any of AMCs existing funds do not offer.
- A contribution is made to the pool of investment that is yet to be invested by subscribing to NFO.
How to Analyse an NFO (Checklist)
- Asset Management Company (AMC): Good experience (At least 10 years), Good growth in its Asset Under Management (AUM), Lower expense ratio, Good portfolio of existing funds.
- Fund Manager
- Investment Strategy: Does the offering meets your investment needs (theme).
- Load: Different funds have different exit loads.
- Risk and Return Potential.