How a New Fund Offer (NFO) works explained


NFO stands for a New Fund Offer.

A nfo means a new fund from a mutual fund house which was not available earlier.

With growing acceptance of mutual funds as a form of investment, mutual fund houses periodically introduce new fund offers so as to complete their basket of investments available for investors.

A NFO is usually what results in the beginning of a mutual fund scheme.

Other reasons being merger of schemes within the same fund house or merger or acquisition of two or more fund houses, these are rare instances though.

new fund offer


NFO meaning

A nfo or a new fund offer is a method by which a mutual fund scheme raises the initial investment into the fund.

The new fund offer is available for purchase for a limited number of days only.

After which it becomes unavailable for fresh purchase or redemption for a couple of days.

Once this time duration is complete, the nfo no more remains a nfo and is treated like any other open ended mutual fund scheme.

In which you can invest and redeem as and when you please, considering it is an open ended fund and you comply with the necessary exit load calculations.


Types of New fund Offers (NFO’s)

NFO’s can be categorized as open ended or close ended

Open ended

Open ended nfo’s are those funds where once the nfo period is over, the fund becomes an open ended fund.

Anyone can invest and redeem as and when they wish.

Those who invested during the nfo period can also redeem once the nfo period is over.

Close ended

In a close ended scheme once the nfo period is over, one cannot invest or redeem as per their own wish.

The fund usually becomes close ended for 3 to 5 years, 3 years usually.

As far as possible, it is better to avoid a nfo mutual fund that is close ended.

This is because historically such funds have more often than not fetched extremely poor returns and the reason for that is actually quite simple.

Since no one can redeem for 3 to 5 years, there is not much pressure on the fund manager to perform.

Even if the fund underperforms, investors cannot shift their investment to another mutual fund scheme.

Therefore the fund is assured of the investment amount till the expiry period.

This is not always the case but mostly so with close ended funds, elss or tax saving funds funds being an exception.

In an open ended fund, both the fund manager as well as the fund house in under pressure to perform since constant underperformance can result in redemptions.

Additional reading: Click Here to read why you should not invest based on past returns


Features of a nfo

An equity nfo can be kept open for a maximum of 15 days.

Debt funds and liquid fund nfos are kept open for an even shorter time, 3 days or so.

The amount collected in a nfo mutual fund has to be invested within 6 months.

Most nfo’s do not wait that long and invest the complete amount much before the 6 month time period with exceptions.

Units are generally allotted within 5 days after the nfo mutual fund is closed.

If your new fund offer application is rejected due to incomplete kyc or incorrect details provided then the amount is credited back to you.

Every nfo mutual fund has to declare before hand the minimum invested amount as well as the asset allocation and investing style among other things.


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Timing of a NFO

Historically and numerically speaking, most nfo’s have been launched during market buoyancy.

This makes sense since there is a feeling of euphoria when the markets are on a high.

It is easier to collect money and gain investors trust during market highs than during market lows.

Therefore it should not come as a surprise that most nfo’s are launched  during market highs.

In fact with the markets being on a bull run in 2021, 5 nfo’s are being launched within a space of ten days.


Launch date

Trust Short Term Fund

20th July 2021

Nippon India Flexi Cap Fund

26th July 2021

IDFC US Equity Fund of Fund

29th July 2021

Mahindra Manulife Flexi Cap Fund

30th July 2021

SBI FMP Series 48

30th July 2021


Another point of influence with a nfo mutual fund is the acceptance and demand of a particular theme or style of investing during a particular period.

For example, look at the launch of the following IT based mutual fund schemes.



Launch date

Birla Sunlife Digital India Fund

Jan 2000

Franklin India Technology Fund

Aug 1998

ICICI Prudential Technology Fund

Mar 2000

SBI Technology Opportunities Fund

July 1999


Additional reading: Click Here to read why you should review your mutual fund portfolio yearly

The reason for all these Funds being launched between 1998 and 2000 is because this was supposed to be the time of the IT boom in India.


The IT sector in 1998 contributed 1.2% to India’s GDP. The TIDEL Park, the then largest IT park in Asia was opened in the year 2000.


The Information Technology Act was also passed in the year 2000 which paved the way for legal procedures for electronics transactions and e-commerce.


All of the above factors did help in creating a positive market environment for the IT sector to boom and various AMC’s were not going to be left behind to milk this.


This therefore led to the launch of several IT based Mutual Fund Schemes in the space of just 2 years.


We have thus seen how the positive scenario around one particular sector helped in driving investors towards a particular Mutual Fund Scheme.


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        Now let’s look for an example where a beaten down sector allows for business to thrive in a particular sector driven Mutual Fund scheme.



Launch date

DSP Healthcare Fund

Nov 2018

ICICI Pharma Healthcare & Diagnostics Fund

July 2018

IDBI Healthcare Fund

Feb 2019

Mirae Asset Healthcare Fund

July 2018


All of the above mentioned schemes were launched within a space of just 8 months.


The reason for this is that the Pharmaceutical sector as a whole was down, this therefore paved the way to build up a consensus that the past is behind us and things will only get better from here on.


As mentioned above, the timing of the launch of these types of schemes is very much dependent on the narrative that one wishes to believe.


After the market crash of March 2020, there was a growing clamour and acceptance of international mutual funds.

Mutual fund houses were quick to cash in on this new demand and this led to a surge of international nfo’s.



Launch date

Edelweiss US Technology Equity FoF

Mar 2020

Motilal Oswal S&P 500 Index

April 2020

Axis Global Equity Alpha FOF

Sept 2020

Invesco India – Invesco Global Consumer Trends FOF

Dec 2020

Kotak International REIT FOF

Dec 2020

Kotak Nasdaq 100 FOF

Feb 2021

Axis Greater China Equity FOF

Feb 2021

HSBC Global Equity Climate Change FOF

Mar 2021

SBI International Access – US Equity FOF

Mar 2021

Mirae Asset NYSE FANG + ETF

May 2021

BNP Paribas Funds Aqua FOF

May 2021


May 2021

Axis Global Innovation FOF

May 2021

Kotak Global Innovation FOF

July 2021


Earlier mutual fund houses could come out with as many nfo’s as they wanted.

Since 2018 though, a mutual fund house cannot have more than two funds in the same category for equity funds except for thematic and sectoral funds.

The narrative set for every nfo mutual fund should be viewed with scepticism.

A nfo will claim that:

It can solve a problem that you have.

Open your eyes to a problem you are having but haven’t realized yet.

Add something of value to your mutual fund portfolio or

Try to influence your decision by FOMO (fear of missing out).


Should you invest in a nfo?

You can consider it if:

The new fund offer is a category of fund that does not exist in your mutual fund portfolio.

If it is going to be a part of your satellite portfolio.

If it adds a unique touch to your mutual fund portfolio.

If you understand the functioning, objectives and risks attached with the new fund offer.

The nfo mutual fund is aligned with your risk profile.


You should avoid it if:

The new fund offer is not going to add anything of unique significance to your mutual fund portfolio.

If the nfo is going to be a part of your core portfolio.

If the only reason you are investing is due to FOMO (Fear of missing out).

If you do not understand the investment style and risks attached with the nfo.

The nfo mutual fund is not aligned with your risk profile.

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing

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