Earlier this month, the Rs 34 trillion-Indian mutual funds (MF) industry saw one of the highest ever new fund offer (NFO) collection. The scheme broke many records; it was launched by one of India’s largest fund houses. It only reaffirms that fact that NFOs are back in the Indian MF industry. So far in 2021, MFs have launched a little over 50 schemes that collected just under Rs 20,000 crore, as per AMFI records. This excludes the blockbuster July 2021 NFO that we’re talking about. The question is: where is this money coming from? Are investors really investing additional money or is this coming on the back of some large distributors merely advising their investors to shift money from one scheme to another, to be able to show a larger collection? Word on the street is that this fund house’s parent bank collected close to Rs 3,500 crore, another leading private sector bank collected around Rs 1,700 crore and yet another private sector bank got about Rs 500 crore. Moneycontrol couldn’t independently verify these numbers, because how much each distributor gets is not publicly available information. Typically, in the case of large NFOs, market estimates say that 20-30 percent of inflows come from existing schemes where investors were advised to churn. That makes sense, because typically if it’s a unique NFO, then it’s understandable that investors get excited. But if a plain-vanilla diversified equity fund like this large NFO comes along, then there hardly seems any merit in investors suddenly getting so excited. Unless, of course, they have been aggressively pushed and nudged.
