New Fund Offer (NFO) In Mutual Funds

When launching their latest mutual fund schemes into the market, an asset management firm will be able to raise the required capital for the scheme by declaring the new fund offer or NFO

Much like the idea behind an IPO or initial public offering, the specifics of a portfolio, including the company shares to be acquired, types of securities needed, the fund manager, and other relevant details, are integrated into these new fund offerings. These offerings enable investors to buy units of a mutual fund at the subscription price, typically established at Rs. 10 per unit. 

Read on to learn the types, benefits, and things to consider when investing in a new fund offer in mutual funds. 

Understanding New Fund Offers (NFOs)

When an Asset Management Company (AMC) or mutual fund house decides to introduce a new mutual fund scheme, it initiates a New Fund Offer, commonly referred to as NFO. Thus, a New Fund Offer represents the initial presentation of the mutual fund schemes, allowing investors to get in early and benefit from substantial returns.

An NFO serves as a means for a mutual fund house to gather the necessary funds for acquiring stocks or debt instruments. Generally, AMCs provide a subscription window lasting from ten (10) to fifteen (15) days, within which investors can purchase units at a net asset value (NAV) of INR 10 per unit. The distribution of units to investors follows a first-come, first-served basis.

During the NFO duration, investors can invest in two distinct types of funds. The subsequent section provides a more detailed explanation of these fund categories.

Types of New Fund Offers

AUM in Mutual funds represent the prevailing category of fresh fund introductions. These new fund offerings encompass both open-end and closed-end mutual funds. Additionally, new exchange-traded funds (ETFs) also make their debut via new fund offerings. The subsequent section provides insights into the investment process for several prevalent forms of new fund offerings in the market.

Open-End Fund

During a new fund offer, an open-end fund will declare fresh shares available for acquisition on a designated commencement day. The volume of shares in open-end funds is not restricted, and these funds can be purchased and sold through a brokerage firm starting from their initial release date and onwards. Unlike exchange-traded shares, these are not traded on a stock exchange but are overseen by the fund company and its affiliated entities. Open-end mutual funds provide daily reports of net asset values after the market’s closure. Fund companies utilize new fund offers to introduce novel investment strategies or additional share classes for existing strategies.

Closed-End Fund

Closed-end new fund offerings are frequently among the extensively promoted fresh fund launches. This is because this fund exclusively releases a predetermined quantity of shares as part of its new fund offer. These closed-end funds are traded on an exchange, showcasing daily price quotations during trading hours. Investors can purchase closed-end funds via a brokerage firm on the launch date. 

What To Remember When Investing in A New Fund Offer?

The Reputation of an AMC

The asset management company’s or investment bank’s past trajectory significantly shapes the potential outcomes of a newly launched New Fund Offer (NFO). Likewise, you must check the track record of all portfolio managers, mainly when the mutual fund is managed actively, given its implications on future performance.

Cost Of Investment

A mutual fund’s New Fund Offer (NFO) introduces a minimum subscription requirement, necessitating the purchase of a specified quantity of units to join the new fund offering. Consequently, individuals interested in the scheme often face a notable investment obligation.

Nature Of Securities

An announcement of an NFO includes directives outlining the types of stock market instruments to be acquired using the raised capital. Perusing such documentation holds significant importance as it elucidates the level of risk tied to the invested capital and provides insights into the anticipated return on investment (ROI).

How Does NFO Work?

During a new fund offer, the chance to participate in the scheme is accessible for a restricted duration. Within this predetermined timeframe, investors can acquire units of the mutual fund scheme and subscribe to the NFO at a set offer price, typically Rs 10. Following the conclusion of this period, investors can purchase fund units at the designated price. Historically, NFO subscribers have often achieved superior gains after the fund is listed.

Why Investing in NFO Can Be Beneficial?

Using an NFO, the fund house gathers funds from the general public to acquire various market securities like equity shares and bonds. The NFO typically offers a more economical investment option than existing funds. This scenario parallels Initial Public Offerings (IPOs), wherein the public can purchase shares before they are officially listed on a stock exchange. The considerable array of marketing endeavours contributing to its promotion creates an attractive opportunity that needs to be noticed. However, it’s essential to exercise discernment and prudence before deciding, as choosing the most suitable might require your judgment.


Having gained an understanding of what NFO in mutual funds entails and its diverse advantages, the next step involves utilizing a mutual fund calculator to project potential returns and make informed investment choices. You can browse through the extensive compilation of the top-performing funds across all categories, enabling you to pinpoint the most suitable option that aligns with your investment requirements.