AMCS launch 60 NFOS, mobilise ~27K cr in 6 mths

Domestic asset management companies (AMCS) have launched close to 60 new fund offers (NFOS) over the last six months, mobilising over ~27,000 crore in the process, as fund houses looked to cash in on buoyancy in the markets.

New offerings are usually lined up during a bull market when investor sentiment is at its peak, but industry experts believe that launching of NFOS is largely to complete their bouquet of products.

“The markets regulator has come out with the categorization of schemes and fund houses are coming up with schemes not there in their product basket. Even the markets are positive, and people see the success of NFOS, which also helps them to come and invest in MFS,” said DP Singh, chief business officer at SBI Mutual Fund.

In 2017, Securities and Exchange Board of India (Sebi) had come out with a circular on categorization and rationalization of mutual fund schemes. Now, only a single scheme is allowed to be launched in one category. Earlier, fund houses used to have multiple schemes in a single category which used to confuse investors.

In the last six months, the highest collection through NFOS was done in December when 14 schemes were launched in multiple categories and over ~9,000 crore was collected. Last month, 12

NFOS were launched, which mopped up ~5,910 crore.

However, in April only ~540 crore was collected through new offerings, as there was less appetite from investors due to the second wave of Covid-19. Market participants said in the rising market period, several distributors ask investors to shift from one product category to another. While upfront commissions are banned by the regulators, new funds offer higher trail commission to distributors.

“We have seen a large number of churning from existing schemes to new schemes by distributors. Having said that, there are a few thematic products such as ESG funds and funds of funds (FOF), which have attracted investors,” said a CEO of the mid-sized fund house.