A New Fund Offer (NFO) is the first-time subscription offering of a new mutual fund scheme launched by an asset management company (AMC). Similar to an Initial Public Offering (IPO) in the stock market, an NFO allows investors to purchase units of a mutual fund at the offering price, typically set at ₹10 per unit in India. Once the NFO period closes, the fund’s units are available for purchase or redemption at prevailing Net Asset Value (NAV).
Announcement: The AMC announces an NFO, detailing its investment objective, theme, and tenure.
Subscription Period: The NFO remains open for a fixed subscription period.
Price: Units are sold at a fixed price, usually ₹10 per unit during the NFO period.
Fund Mobilization: After the subscription closes, the AMC pools the collected money to create a diversified portfolio of securities as per the scheme’s mandate.
Listing: Post-NFO, units are available for trading at NAV, which fluctuates based on the market value of underlying assets.
Limited Subscription Window: Investors must act within the NFO period to subscribe to the scheme.
Benchmarking: Each NFO is benchmarked against an index or standard to track its performance.
Investment Mandate: Clearly defined objectives guide the allocation of assets, ensuring transparency.
Lock-In Period: Certain NFOs, such as close-ended funds, have a predefined lock-in period, restricting withdrawals during this time.