MF collects Rs 1.08 Lakh Crore via 176 NFOs in FY22 on interest from retail investors

Taking advantage of intense interest from retail investors and a strong rally in equity markets, asset management companies (AMCs) launched 176 new fund offerings (NFOs) in 2021-2022, garnering a whopping Rs 1 .08 lakh crore.

With liquidity tightening, interest rates on the rise, stock market consolidation underway, back to work from the office, there may be moderate interest in NFOs going forward. While the fixed term plan (FMP) category could see considerable launches, the same cannot be expected from other categories, said Gopal Kavalireddi, head of research at FYERS.

In addition, almost all AMCs launched new programs in most categories, filling existing product gaps that were created after the recategorization, he said.

“Gaps in investment objectives, investor interest in specific themes, availability of funds for deployment, credibility and reputation of fund managers, and stock market performance could dictate the quantum of new launches. “, he added.

According to data compiled by Morningstar India, there were 176 new fund offerings (including closed-end funds and ETFs) in 2021-22. These managed to raise a staggering Rs 1,07,896 crore during their inception phase.

This was far more than 84 NFOs launched in 2020-21 and cumulatively these funds were able to raise Rs 42,038 crore.

Usually, NFOs occur during a booming market when investor sentiment is high and optimistic. The stock market as well as positive investor sentiments continued to rise after March 2020, which led to the launch of more NFOs.

NFOs were started to capitalize on the mood of investors and attract their investments as they were ready to invest at that time.

Coincidentally, during the same period, Indian capital markets Sebi and the Association of Mutual Funds of India (AMFI) made sweeping changes favorable to investors, including the removal of exit charges, caps on entry, categorization and reorganization of mutual fund schemes, direct plans, risk-o-meter, new category addition, Flexicap and other policies, thereby raising investor awareness and bringing clarity and transparency in investments.

With the need to improve income levels, and also from a long-term investment perspective, together with the actions taken by Sebi and Amfi, there has been a wave of OPNs across many mutual fund categories – equities and debts, Kavalireddi said.

Most of the programs have been launched in the indices and ETFs category, to support both passive and active investors.

The maximum number of funds (49) was launched in the index fund segment, which raised Rs 10,629 crore, followed by other ETFs (34), which raised Rs 7,619 crore and fixed-term plans ( 32), which raised Rs 5,751 crore.

In addition, investors were attracted by international funds and sector or thematic funds. The AMCs launched funds of funds abroad, which mopped up Rs 5,218 crore and 11 sector or thematic funds, which raised Rs 9,127 crore.

Experts believe that the dominance of index funds and ETFs (exchange-traded funds) among NFOs is not surprising, due to several factors.

The current financial year 2022-23 has seen the launch of just four NFOs, raising a total of Rs 3,307 crore, with ICICI Prudential Housing Opportunities Fund taking the lion’s share of Rs 3,159 crore.

In addition, Sebi’s latest ban on NFOs will delay the launch of around 15 programs as the market regulator focuses on streamlining the issue of pool accounts, upgrading technology in AMCs, l two-factor authentication, among other things, to avoid potential fraud in addition to minimizing operational risk. , said Kavalireddi.

In addition, the latest front running issuance of Axis Mutual Fund shares has raised trust and credibility issues for fund companies and their respective fund managers, he added.

In April, Sebi banned the launch of new mutual fund schemes until July 1.

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