Sharekhan Blog

The Lifecycle of a New Fund Offering (NFO)

  • Apr 11, 2025

Like an Initial Public Offering (IPO), a New Fund Offer (NFO) is the launch of a new mutual fund in the market before it is made available for subscription.

An upcoming NFO often gives investors an opportunity to invest in a new fund at an affordable price at the start of its lifecycle. But an investor should evaluate it to make sure that he or she has invested in what can be the best NFO to invest today.

To understand how a new NFO works, it would be useful to know about the lifecycle that a new fund offering goes through.

Launch and Subscription of an NFO

An NFO is initiated when an Asset Management Company develops a new NFO mutual fund with a specific investment objective and strategy. NFOs of new mutual funds are launched with the sole objective of raising capital from the market through public subscriptions. A new mutual fund offer usually lasts for a period of 15 to 30 days, as per the regulations of SEBI.

During this period, investors can subscribe for the latest NFO by buying its units at a fixed price. Subscriptions for upcoming mutual funds can be made both online and offline, either through the official website of the AMC, mutual fund aggregators, or even through registered brokers and financial service providers like Mirae Asset Sharekhan.


Post New Fund Offering Allocation

At the end of the NFO period, the Asset Management Company will allocate the subscribed units accordingly to the investors. If the total demand for the units of an NFO mutual fund is greater than the actual number of units available, the subscription size of the fund might be modified by the Asset Management Company. Alternatively, a lottery might be held to decide the allocation of the units for any upcoming NFO.

Also, the capital that has been raised through the subscription of the new NFO will be utilized to build the actual fund portfolio of securities and assets as per the decided objective and strategy of the same. This is also the principle on which any fund that qualifies for an investor as the best NFO to invest today works.

Once when the offerings for new mutual funds are completed, when the subscription period comes to an end, they are priced as per the Net Asset Value (NAV) and is made available for trading in the market. The price of the new fund will vary as per the value of the underlying assets of the fund.

This is how the lifecycle of a new mutual fund offer works. Every upcoming NFO goes through all these stages.

NFOs are usually classified on the basis of two crucial factors: the structure of the fund and the investment strategy adhered to. Let’s take a look at some of the common types of NFOs prevalent in the market.


Types of New Mutual Funds

Equity-Based New Funds

These are new funds that are composed of stocks listed on the exchanges. Their primary objective is to achieve long-term capital appreciation for the investor in an aggressive approach. Therefore, they are most suitable for investors who are willing to face a higher level of risk in the market.

Debt-Based New Funds

These are funds that are composed solely of fixed income instruments such as bonds, debentures, and government-backed securities. They are ideal for investors who prefer a prudent and risk-free investment experience. Such funds yield stable returns over a fixed period of time.

Hybrid New Funds

These are funds that offer a suitable mix of equity and debt instruments, thus providing a balanced investing experience of steady returns and moderate exposure to risk. They have a higher growth potential than NFOs that are made up entirely of debt instruments.

Thematic & Sectoral New Funds

There are some funds that are designed around specific sectors primed for growth, such as infrastructure or sustainable energy. They can also be developed basis emerging themes such as market caps and asset classes that are becoming gradually popular among investors.

Different mutual fund offerings come with unique advantages and an investor should be aware of them all before making the most suitable decision.

With the help of a SIP Calculator or a Lumpsum Calculator, you can further decide how and how much to invest in any of these options of latest mutual funds.

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by Team Mirae Asset Sharekhan

Guiding Wealth Creation since 1995

We've been ranked as India’s No. 1 Retail Broker by Asiamoney Brokers Poll 2023. Here, we bring you the latest in the world of Trading and Investments in our effort to Make the Markets work for YOU!

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