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239 NFOs in 2024, HDFC Manufacturing Fund leads with Rs 12,500 Cr inflows

Thematic and sectoral funds stood out as top choices for investors, reflecting a shift towards more focused and innovative investment options

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Sunainaa Chadha New Delhi

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The year 2024 witnessed the launch of a record 239 new fund offers raising Rs 118, 519 crore collectively, 13 per cent higher than the 212 NFOs in 2023 while the funds raised through NFOs surged by 85% compared to the previous year, shows data analysed by Germinate Investor Services.  
 
Thematic and sectoral funds stood out as top choices for investors, reflecting a shift towards more focused and innovative investment options.
 
3X Growth Over Five Years: The NFO landscape expanded from 81 in 2020 to 239 in 2024
 
"The mutual fund industry shattered records in 2024 with the launch of over 200 new schemes. The surge in NFOs reached peaks in September and October, coinciding with a market rally.
 
These months alone accounted for more than 50 new fund launches, amassing over Rs 20,000 crore in investor contributions," said the report.
 
July was particularly noteworthy, with collections exceeding Rs 16,500 crore, driven by market optimism and aggressive fund marketing. Conversely, April saw the lowest collections of just over Rs 1,500 crore, likely influenced by market volatility and cautious sentiment.
 
Overall, thematic funds, ETFs, and index funds contributed to 188 out of 239 NFOs launched during the year.
 
Tailored to specific sectors or themes, these funds resonated with investors for their focused approach and alignment with market trends. Notable examples include funds targeting sectors like manufacturing, technology, and ESG (Environmental, Social, and Governance) themes. Over 90% of new collections were concentrated on thematic and Smart Beta funds, including ETFs and index funds, reflecting a shift toward targeted and innovative investment strategies.
 
Leading Themes: Manufacturing, Energy, Business Cycles, Technology, and Smart Beta Funds were the prominent investment themes of 2024.
 
"Thematic funds led the charge in 2024, capturing investor attention with their compelling narratives and potential for high returns. Manufacturing funds were especially notable, attracting over Rs 7,000 crore in April, the highest AUM mobilized for a thematic fund during an NFO collection.
 
Multi-Asset Funds Gain Traction 
In response to market volatility, multi-asset funds emerged as a strong contender. Offering a diversified portfolio that includes gold, international equities, domestic equities, and fixed income, these funds appealed to risk-averse investors seeking balanced returns. Their unique ability to hedge against market downturns while providing exposure to multiple asset classes garnered steady inflows, indicating growing acceptance as a viable diversification strategy.
 
New AMCs Drive Growth in Diversified Equity 
The diversified equity category experienced renewed vigor, driven by new market entrants with innovative fund offerings. Multi-cap and flexi-cap funds, catering to investors seeking broad equity exposure without market-cap restrictions, became increasingly popular. While established AMCs focused on thematic funds, ETFs, and index funds, new fund houses introduced diversified equity baskets, enhancing product diversity and fostering competition, ultimately benefiting investors.
 
Outlook for 2025 
"The mutual fund industry is likely to face a recalibration in 2025 after the strong gains of recent years. While extraordinary returns may not sustain, the focus will shift to ensuring stability, maintaining liquidity, and achieving reasonable returns in line with market trends. Investors must adapt to a more balanced approach, safeguarding capital while managing expectations. This calls for strategies that align with changing market dynamics and ensure a steady performance even in uncertain times. A forward-looking, strategic approach emphasizing diversification and alignment with macroeconomic themes will be crucial for investors aiming to capitalize on emerging opportunities in the year ahead," said Santosh Joseph, CEO of Germinate Investor Services.
 
Hybrid and multi-asset funds are expected to lead the way, offering the flexibility to navigate diverse asset classes and create well-diversified portfolios. These funds help mitigate risks and enable investors to remain committed for the long term without chasing individual themes. Additionally, trends such as thematic funds targeting green energy and digital transformation, the growth of ETFs and Smart Beta strategies, and diversified options like multi-cap funds will shape the industry's future.

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First Published: Jan 14 2025 | 12:07 PM IST

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