A beginner’s guide on NFOs by Mutual Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trying something new and innovative can be a way to achieving something worthwhile. Similarly, exploring and trying new products in mutual fund investments domain, can be a good path which can help in achieving your financial goals.

The Indian economy is growing rapidly and seems to be creating fresh avenues, for investments as well as long-term wealth creation’s perspective. Many of us may want to capitalise on this growth story but don’t know how. One convenient way can be by participating in new fund launches by a mutual fund.

The new investment category is launched through a mechanism called new fund offer or NFO. The launch of a new category /type of scheme generally depends upon factors like the market conditions, its favourability, the track of the segment /space under which the launch is proposed, the segment’s viability, amongst others.

 

What is an NFO?

When an Asset Management Company (“AMC”)/mutual fund house wants to introduce a new category of fund they can do so by way of an NFO. The NFO helps the AMC raise capital for investment in the scheme from a pool of investors by selling initial fund units.  Once when its reasonable base of capital is pooled it can be utilised to build a portfolio and realise the investment objectives of the scheme. The new fund offer is available to interested investors for only a specific period of time. NFO’s can be a chance for investors to diversify their investments to include innovative products like new sectors or asset classes in their portfolio which may help create that long term value.  The NFOs allow investors to invest at a face value/base price of each unit, at which the scheme is launched, which can be as low as Rs. 10 per unit, depending upon the scheme type and category.

The NFOs are to be kept open for subscription for a minimum period of 3 working days and cannot be kept open beyond 15 days, or such other time period as the SEBI (Mutual Funds) Regulations, 1996 may prescribe.

• New Fund Offer of open ended schemes allow investors to purchase the scheme’s units during the NFO period. Even after the NFO period has closed, post its launch on an ongoing basis units of such schemes can be purchased. Investors can also redeem units associated with the scheme at any given time. 
• New Fund Offer of Close Ended Schemes (NFO), allow investors to purchase the units of scheme till the time the NFO is live. Once, the NFO closes investors cannot buy new units or redeem the units till the maturity of the close ended fund. If an investor wishes to exit from such a scheme, the investor can do so by selling the units at the stock exchange where the units of the close ended fund would be listed. 

 

How to Invest in NFOs by Kotak Mutual Fund (“KMF”)?

• Visit : https://www.kotakmf.com/investor/Lumpsum-PreLogin-Mobile-Submit
• Enter your Details Name | Mobile No | Email Id and authenticate with OTP (One time Password)
• Select the Folio
• Select the NFO Scheme Type & Scheme name , enter amount
• Select the Payment Mode
• Review the transaction detail & make the payment.

Investors can also apply offline by submitting NFO applications at KMF’s Official collection centres.

Source: KMAMC internal research

Disclaimer:

The document is not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation.  The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.

The document may include statements/opinions which contain words or phrases such as "will", "believe", "expect" and similar expressions or variations of such   expressions, that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or  uncertainties associated with the statements mentioned with respect to but not limited to exposure to market risks, general and exposure to market risks,  general economic and political conditions in India and other countries globally, which may have an impact on services and/or investments, the monetary and  interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. Past performance may or may not be sustained in future. Investors should make any investment decision post considering their risk appetite. Investors may consult their financial advisor and/or tax advisor before making any investment decision. Kotak Mahindra Asset Management Company Limited/ Kotak Mutual Fund is not guaranteeing or promising or forecasting any future returns/performances.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.