Fund Houses All Set to Launch NFOs As Ban Nears End

Since April there have been no new NFOs because of the delay in the implementation of the new norms around pooling of funds.

Asset management companies (AMCs) are preparing to launch new fund offers (NFOs) as the three-month embargo nears its end.

At least five AMCs filed offer documents with capital markets regulator Securities and Exchange Board of India seeking its permission to launch new schemes.

Since April there have been no new NFOs because of the delay in the implementation of the new norms around pooling of funds.

"We think the industry has now complied with the new regulations. The mutual fund industry might once again see a series of NFOs in the days to come," said the chief executive officer of a mid-size fund house.

In a circular in October 2021, Sebi had stated that pooling of funds or units by stockbrokers and clearing members in any form or manner shall be discontinued for all mutual fund transactions.

The regulator asked the industry to implement this from April 1, 2022.

However, after discussions and agreement, Sebi had given the MF industry extended timelines until July 1, to enable the industry to bring in a high level of operational efficiency in the interest of investors and efficient functioning of mutual fund subscriptions and redemption.

At present, funds or units of the mutual fund schemes move through stockbrokers' or clearing members' pooled accounts in an aggregate manner to a client or clearing corporation or AMC's account.

In the past, NFOs have helped AMCs garner assets. For instance, between July and December 2021, the industry was able to mobilise over Rs 12,000 crore through NFOs in two months and over Rs 6,000 crore (Rs 60 billion) on two other occasions.

Some of the funds that filed offer documents were Axis Long Bond Fund, Franklin India Balanced Advantage Fund, LIC MF Multi Cap Fund, and Sundaram Flexi Cap Fund.