New fund offers likely to see lower flows due to weak investor sentiment

In March, collections had declined nearly 50%

New fund offerings (NFOs) floated by mutual funds (MFs) to fill product gaps, or offer focused exposure to an investment theme, are likely to see limited collection due to weak investor sentiment and disruption of offline channels amid a nationwide lockdown.

NFO collections in March dipped to Rs 1,310 crore — 48 per cent lower than the previous month.

“Fresh allocations from investors to new funds can be challenging, given weak investor sentiment. Several investors are considering halting existing allocations due to prevailing market volatility,” said Arun Kumar, head of research, FundsIndia.

Some fund houses have rescheduled or extended their NFO timelines with distribution partners, seeking more time.

 

 

“Collections are not a concern. However, offline independent financial advisors have suggested waiting for the lockdown to be lifted, so that they can also participate in the NFO,” said George Joseph, chief executive officer and chief investment officer at ITI MF, which has put large-cap NFOs on hold.
 

“We will float the NFO as soon as the lockdown is lifted. Current valuations are attractive and can benefit investors in the long run,” added Joseph.

Since March 23, all MF branches have stayed shut to adhere to the social distancing guidelines laid down.

Recently, L&T MF had extended subscription timelines of two of its NFOs — L&T Nifty50 Index Fund and L&T Nifty Next50 Index Fund. An email query sent to L&T MF didn’t elicit any response at the time of going to press.

Experts say some MFs may delay their NFO plans and wait for more stability in the markets. “Due to the lockdown situation, fund managers are unable to do roadshows. Digitally pitching new funds to investors can be challenging, especially in the current environment. Some MFs may consider holding off their NFOs until investor sentiment turns more positive, so that sizeable flows can be garnered,” added Kumar.