The Hindu Business Line : More NFOs to hit market this year

It's the second week of January and the new fund offers (NFOs) pipeline is already getting thicker. Fund houses presage the arrival of a range of funds, including hybrid products that will come bundled with insurance, in addition to the much-discussed gold ETFs and schemes that will invest in overseas markets.

A wide selection of funds may greet investors this year, affirming trends that started taking shape in 2006 and spawning new ones as well, say mutual fund sources. The reference is clearly to the launch proposals that the asset management industry is said to be considering for the months ahead.

A number of fund houses are already known to be lining up capital protection oriented products. Players such as UTI Mutual have led the march, rolling out their close-end schemes marked by ratings of their portfolio structures. A few others have sent offer documents to the market regulator for clearance. These include Prudential ICICI and Birla Sun Life.

Mr Pankaj Razdan, MD of Pru ICICI MF, feels that the year will see funds actively work on new ideas and translate some of them into NFOs. "The industry will mount a more serious attempt at bridging the gaps in its chain of products," he said. Pru ICICI itself has lined up an interval fund, it may be mentioned.

Hybrid products — which will essentially combine equity and debt in various proportions — may well be a recurrent theme in 2007, sources point out. Some sections expect to see the advent of many of these, including a few with a heavier equity component (compared to some of those introduced traditionally). Others, especially fund houses that have insurance companies as part of their group, see the possibility of adding insurance to new products.

"There is scope for more on the hybrid funds front. We may see a variety of funds, including ones that will tap investors' liking for equity. In the past we had seen a surge in monthly income plans and some of that sentiment may return," feels Mr Rajesh Bhojani, President & Country Head, UTI MF.

International investing by local outfits will also be an in-thing, it is believed. This will in fact be a continuation of the trend that has already started in a small way. While not all classes of asset management companies are expected to evince interest in the immediate future, a few players may come up with specific NFOs with at least partial exposure to international securities. In fact, HSBC MF has already mooted a fund for emerging markets.

FMPs

The past year was quite interesting for the NFO watcher, given the number of new offers that were rolled out. A sizeable number of these were fixed maturity plans (FMPs), which were launched relentlessly throughout the year.

This year too will not be any different, sources say, while referring to the plans that have been lined up. Offer documents placed at this moment with SEBI include FMPs by DSP Merrill Lynch MF, LIC MF, ING Vysya MF and newcomer Lotus India MF.

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