What is New fund offers (NFO)?

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Overview:

Recently, after the Budget, fund houses have started a number of equity new fund offers (NFO) to boost market share and draw investors.

About New fund offers:

  • A new fund offer (NFO) refers to the initial sale of fund shares issued by an investment company to investors.
  • Similar to an IPO in the stock market, NFOs are intended to raise capital for the fund and attract investors.
  • Mutual funds are the most common type of new fund offering.

Types of New Fund Offers

  • Open-End Fund: These funds do not limit their number of shares. These funds can be bought and sold from a brokerage firm on their initial launch date and thereafter. The shares do not trade on an exchange and are managed by the fund company. 
  • Closed-End Fund: Closed-end new fund offers are often some of the most highly marketed new fund issuances since closed-end funds only issue a specified number of shares during their new fund offer. Closed-end funds trade on an exchange with daily price quotes throughout the day.

 


Q1) What is a mutual fund?

A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments etc

Source: NFOs back, but no need to rush bets