MFs go slow on new schemes

Majority of them came before cap on commission became effective in April

The mutual fund (MF) sector has been more selective this year on equity scheme launches. So far this year, fund houses have had 53 new fund offers (NFOs), garnering Rs 8,435 crore. Last year, they’d launched a record number of 75 schemes, mobilising Rs 12,219 crore.

Most of the launches this year were in the first months, before the Association of Mutual Funds in India (Amfi) imposed a cap on commissions. Nearly 30 equity NFOs hit the market during January-March. From April 1, as a cap of one per cent on commission took effect, there was a visible decline. Only another 23 schemes had been launched till November.

Like last year, a majority of the new schemes were closed-end ones, where a lumpsum is invested with a fixed lock-in period.

This year, 35 of 53 schemes were closed-ended, 18 of these coming in those first three months.

Jimmy Patel, chief executive officer at Quantum MF, says: “Post March, we haven’t seen many NFOs. Sebi (the markets regulator) is insisting on a merger of look-alike schemes. Only when that is done could we again see a rain of NFOs. This (Sebi's instruction) is a positive step, as it doesn’t make any sense to clutter an investor’s portfolio with similar schemes. Also as Amfi introduced its best-practice guidelines, it disrupted the commissions structure, leaving less room for a successful NFO.”

 

Investors have preferred existing schemes with a track record to NFOs. Last year, the average money raised through an NFO was Rs 163 crore; this year, it's Rs 159 crore. of the Rs 1.6 lakh crore of total gross sales in the equity segment, new schemes this year are five per cent.  

Adds Rajiv Shastri, chief executive of Peerless MF: “I expect the number of NFOs will continue to slow down, as we have seen post March. Only need-based launches can be seen, going forward. Players with a product gap in their offerings might come up with new launches.”

Currently, there are 463 equity-related schemes (diversified and equity-linked savings schemes), managing assets of Rs 4.02 lakh crore.