 "MFs launch 75 equity NFOs in 2014; mobilised assets worth Rs 12,220 crore")
Equity new fund offers (NFOs), which had gone out of fashion post Lehman Crisis, have made a strong comeback in 2014. Indian mutual fund industry launched a whopping 75 new offers in the equity segment during the year - a historic high for the sector.
In a year which witnessed key stock indices gain about 30%, these new schemes managed to garner Rs 12,200 crore - highest since 2008.
Interestingly, close-ended schemes - the latest flavour of the season dominated the space. Out of the 75 new offers, 51 were close products with a lock-in period of 3-5 years. They collectively mobilised assets worth Rs 9,600 crore. It's a significant amount given the past poor record when it comes to assets gathering through NFO route.
Fund houses like Sundaram MF, ICICI Pru AMC, Birla Sun Life AMC, Reliance MF and UTI MF,among others were the key players to offer close-ended products to investors. Rather, as the year progressed, number of launches only gathered space. In fact, in December there were 13 close-ended equity products - the highest for a month in 2014. Collectively, they gathered Rs 2,222 crore of investors' money.
Open-ended schemes, which provide room to investors to exit, took a back seat. Both in number of launches and asset mobilisation, they did not do as well as the close-ended ones. On an average, an open ended scheme attracted assets worth Rs 109 crore while in case of close-ended category the average mobilised assets stood at about Rs 190 crore.
Higher commission payout to distributors, mainly to banks, of as high as 6-7% was the key driver behind the success of close-ended schemes. Though, this practice of unreasonably high payouts attracted regulator's wrath during the last quarter of the year. The Securities and Exchange Board of India (Sebi) showed its concerns about likely mis-selling of products to investors because of higher commissions.
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Going forward, experts believe that there could be more such launches as experience of several fund houses while toying with the idea of closed products has been quite satisfactory.
As in date there are a little over 400 equity schemes (including ELSS) in the sector managing an asset size of Rs 3.2 lakh crore.