How to assess New Fund Offers?

Tons of new fund offers (NFOs) were introduced in 2021. Most investors, however, have difficulty assessing them. Continue reading to learn how to assess NFOs.

The year 2021 was outstanding for stock markets, with the Nifty 50 returning roughly 24 per cent and the Nifty 500 returning around 30 per cent. Since the first leeway was granted following the COVID-induced shutdown, equity markets have begun to rebound. Having said that, this is an excellent moment for a mutual fund company to provide new products.   

The asset management firm released a slew of new funds in the year 2021. (AMC). Almost 77 new mutual funds were created last year. This statistic excludes exchange-traded funds (ETFs) and funds of funds (Funds of Funds or FoF). New Fund Offers (NFO) are often launched after markets have performed well in the previous six months to a year. And, for obvious reasons, AMCs seldom offer new products in weak markets, since demand in equities has waned.  

Following is the list of upcoming NFOs 

With so many new funds being launched, it can be tough for investors to decide where to put their money. As a result, we've compiled a list of critical points to consider before investing in NFOs.  

Fund manager's track record  

Unlike the Initial Public Offering (IPO), NFOs have no track record. However, the fund management team's track record is available since they have undoubtedly handled other schemes. The track record of the fund manager provides investors with a sense of how they handle money and what type of investment strategy they specialize in.  

Is it the same story with a different title?  

Many of the new funds that have been introduced include funds from other AMCs with a similar concept. For example, the PGIM India Small-Cap Fund was launched in July 2021. However, there are about 24 funds with comparable objectives. Furthermore, nearly 15 of these funds have a Net Asset Value (NAV) history of more than three years. As a result, you should investigate what this fund offers that no other fund does.  

Asset Allocation  

Mutual funds are required to disclose their asset allocation strategy in a Scheme Information Document (SID). As a result, you should examine the fund's projected asset allocation strategy to see how it intends to allocate money across various asset classes such as stock, debt, commodities, Real Estate Investment Trusts (REIT), and so on.  

Investment Strategy  

This is one of the most important aspects that investors should not overlook. Funds also indicate their investing strategy in the SID. They explain how they will choose the stocks or securities in this section. This would also show the fund's investing style, such as value, growth, or a combination. Furthermore, they reveal their strategy for stock picking. This includes whether they choose stocks using a top-down or bottom-up method, a fundamental or technical technique, or a combination of the two.