NEW FUND OFFERS
A new fund offer (NFO) is a first-time subscription offer for a new scheme launched by asset management companies (AMCs). The investors opting to invest in these schemes at the offer price (in most cases, the offer price is fixed at Rs10) can only do so in a stipulated period. After the NFO period, investors can only take exposure to these funds at the prevailing NAV. A new fund is an offer in the market by the AMCs to fill in the theme the AMC doesn't have in its portfolio. As per SEBI, an AMC cannot overlap with any theme in their bouquet, thus new schemes are launched by the AMC to introduce a concept that is not part of their existing portfolio. The offer remains open for 15 days and reopens after a week for subscription at the applicable NAV.
Types of NFO:
A New Fund Offer can be of two types-
Open-ended funds: This fund is officially launched after the NFO ends. Investors can enter and exit the fund at any time after the launch.
Close-ended funds: A close-ended fund does not allow investors' entry and/or exit after the NFO period, until its maturity. This period is typically 3-4 years from the launch date. However, some close-ended funds get converted into open-ended ones for investors to enter and exit at the prevailing NAVs.