MFS see surge in new fund offers

Broader market recovery seen as catalyst as fund houses look to plug gaps in portfolios

The mutual fund ( MF) industry has seen a strong pick-up in new fund offers (NFOS) in the current calendar year, with over a dozen new products being launched or filed by fund houses.

According to industry experts, the rising pile of NFOS could be attributed to the broader market recovery, and also to fund houses looking to fill up gaps in their product basket. While there have been three NFO launches in January, many more are in the pipeline.

“Since September last year, market breadth has been improving. Typically, during such periods, NFO collections tend to be higher as investor confidence improves with value of investments going up. In addition, fund houses find such periods more conducive to quickly deploy investor funds flowing into their schemes,” said Vidya Bala, cofounder of research platform Primeinvestor.in.

Since September, the broader market indices — BSE Midcap and BSE Smallcap — have given returns of 17 per cent apiece, against 10 per cent returns posted by frontline indices such as the Sensex and Nifty.

After staying away from the small-cap space for long period, the country’s oldest fund house — UTI AMC — has filed for a small-cap fund. IDFC AMC is another fund house that has launched a small-cap fund. Fund houses are also launching thematic funds to expand their product offerings.

Edelweiss MF has launched a US Technology Fund of Fund (FOF). BNP Paribas MF has also filed for a technology fund, which will be an FOF investing in BNP Paribas Funds Disruptive Technology.

Environmental, social and governance, or ESG, funds that invest on the basis of ESG standards of companies, have also seen some product launches.

Both Birla Sun Life MF and DSP MF have filed for an ESG Fund.

Meanwhile, Tata MF has launched a multi-asset fund, which will be the first MF scheme to have exposure to the commodities basket.

The foreign fund house HSBC AMC has filed for a focused equity product, which, as the name suggests, is mandated to make high-conviction bets with the number of stocks in the portfolio limited to 30 stocks. According to experts, however, investors should be cautious when investing in new fund offerings.

“We advise investors to look at NFOS only if the product is introducing a new concept or investment strategy. Otherwise, investors are better off sticking to existing schemes that have a longer track-record and have navigated various market cycles,” said Amol Joshi, founder of Plan Rupee Investment Services.

“With an existing scheme, it is relatively easy to check whether the scheme has been true to its mandate, or whether it has moved away from it in the past,” he added.

Further, fund houses have been launching a slew of passive funds to tap into the rising investor interest in such schemes. “Investors have become a bit more cost-conscious of late, and are showing interest in passive funds in which the expense ratios tend to be lower,” Bala added.

Both Birla Sun Life MF as well as Nippon India MF have filed for a mid-cap index fund and a small-cap index fund, in recent times.