Domestic asset management companies (AMC) have launched around 60 new fund offers (NFOs) in the last six months and mobilised around Rs 27,000 crore. Fund houses are rushing to launch new funds amid buoyancy in the equities market.
While it is a common practice to line up new offerings during a bull market when investor sentiment is at the peak, officials in the industry believe that NFOs launches are largely to complete their bouquet of products.
“The market regulator has come out with the categorisation of schemes and fund houses are coming with schemes that are 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 highest collection through NFOs was done in December last year when 14 schemes were launched in multiple categories collecting over Rs 9,000 crore. Last month, 12 NFOs were launched, which mopped up Rs 5,910 crore.
However, in April only Rs 540 crore was collected through new offering as there was less appetite from investors due to the second wave of covid-19. Market participants also say that 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 the distributors.
| Month | Funds mobilised (in Rs cr) |
| Dec-20 | 9,039 |
| Jan-21 | 4,185 |
| Feb-21 | 3,102 |
| Mar-21 | 4,539 |
| Apr-21 | 540 |
| May-21 | 5,910 |
| Total | 27,315 |
| Source: Amfi |
“We have seen a large number of churning from existing schemes to new schemes by the distributors. Having said that, there are few thematic products like ESG funds and funds of funds (FoF) which have attracted investors,” said a CEO of the mid-size fund house.
Industry players also say that going forward fund houses will focus more on thematic and innovative products as most big fund houses have schemes across all the prominent categories.
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