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Nilanjan Dey

Kolkata , June 9

INVESTORS in mutual funds have to come to terms with a brand-new expression — NFO (New Fund Offer) — as opposed to the commonly-used IPO (initial public offering), which throws up images of equity issues hitting the primary market.

The new term is already being bandied about actively, at least in some sections of the asset management industry. It has been heard at two recent launch functions — Kotak Contra Fund and Birla NextGen Fund — articulated by senior representatives of the two fund houses.

The new term, according to AMFI, the apex body of MFs, should in the course of time, effectively replace `IPO'. The latter is said to often mislead the average investor, who may be inclined to compare a new fund offer with that of an equity offer by a corporate entity.

"An investor often subscribes to an IPO with the hope of offloading it quickly in the secondary market when the issue is listed," said Mr A.P. Kurian, Chairman of AMFI. "This is not always desirable in the context of equity funds," he added while referring to the fact that several new schemes have recently opened for on-going sales with NAVs at less than Rs 10, the offer price per unit.

All new launches are expected to be labelled as NFOs, it is pointed out. A number of proposals are said to be in the offing, including two equity products (Classic, Premier) mooted by Standard Chartered MF, which will make its maiden foray into equity.

Some of the other players who have worked out fresh schemes are Sundaram MF (Rural India Fund, Capex Opportunities Fund), Prudential ICICI (Infrastructure Fund, Service Industries Fund), Sahara MF (Wealth Plus Fund) and LIC MF (Multicap Fund).

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MFs may replace the term `IPO' with NFO

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