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NFO, New Fund Offer in Mutual Funds – Definition, Types, & Benefits

Written by - Akshatha Sajumon

March 28, 2023 7 minutes

You must have seen announcements of many NFOs in mutual funds being launched. Have you wondered what is it, and how different is it from a normal investment in mutual funds. Read on to know all about NFOs and how they work.

What is an NFO (New Fund Offer) in Mutual Funds?

A New Fund Offer is an invitation to the public by an investment company to subscribe to its newly launched fund. It is generally done to finance its purchase of mutual fund units. 

Like an IPO (Initial Public Offer) of a company, an NFO is announced by an AMC (Asset Management Company) to raise capital for launching their new mutual fund scheme. NFO provides all the information about the fund scheme like the shares to be purchased, fund manager details, the benchmark to which the fund will be marked etc.

How does an NFO (New Fund Offer) work?

When an AMC announces a new fund offer, the public or the investors can purchase the mutual fund units at the subscription price. This subscription price is set at Rs. 10 per unit. According to the SEBI (Securities Exchange Board of India) regulations, a new fund offer can remain active in the market for a maximum period of 30 days. Once the new fund offer period ends, the mutual fund units are allotted to investors who subscribed to the issue.

An AMC can utilise the amounts collected in purchasing securities of various listed companies, debt or other commodities as per the Offer document approved by SEBI. Subscribing to a new fund offer of the mutual fund scheme can be done at the base price of Rs 10. Any increase in the Net Asset Value (NAV) post the initial subscription results in gains for the investors.  Post the NFO period, any transaction of the mutual fund can only be made on the NAV price. 

Types of NFOs (New Fund Offer)

The new fund offers are launched with essentially two types of fund offers, namely, close-ended funds and open-ended funds. Among the many differences between these types of funds is the way they are managed. Open ended funds are usually actively managed funds while close ended funds tend to be passively managed funds. Given below are the details of each such funds.

Open-ended Funds

The majority of funds that are offered through NFO are open-ended mutual funds. Open-ended mutual fund schemes do not have any restrictions with respect to the time period of investment or the number of units in the fund. Once the mutual fund starts operating, the fund units can be bought or sold as per the prevailing NAV.

Close-ended Funds

Close-ended mutual funds are funds that do not allow investment in the fund post the completion of the NFO nor any exit from the fund till the maturity of such fund which is usually 3 years to 4 years. The units of these funds can also be traded in the open market but their liquidity is lower as compared to open ended funds.

What are NFO Benefits?

Investment in new fund offers can be advantageous at times. The best part of a new fund offer is that the details regarding the investment objectives, expected return on investment, etc., are provided at the launch time. This helps the investors in deciding whether to invest in the fund or not. If the mutual fund’s objective is matched by the investor’s goals, risk appetite, etc., such investments can be very profitable. Let us discuss the benefits of investing in a new fund offer:

  • Investing and diversifying in new strategies

New fund offers give investors an option to invest and diversify their portfolios in innovative schemes with different strategies and objectives. Investing in unique schemes that provide a chance to generate better returns. Investors can maximize their returns by investing in such funds during NFOs and get the benefit of diversification at a nominal price.

  • The benefit of the lock-in period

Investing in mutual funds requires holding investments for an extended period. However, many investors redeem their investments in a few months or a couple of years. This not only hampers their returns but also their financial goals. Investment in a close-ended mutual fund with a lock-in period during NFO will ensure that the investors will stay invested for at least the minimum tenure. This will help in maximising the returns on their investments and makes the investment approach much more disciplined.

  • Gains on investment 

As stated earlier, investing in a new fund offer of a mutual fund can be profitable as the units are purchased at a nominal rate. Once the units are traded in the open market, any increase in the NAV can substantially benefit the investors.

How can one invest in an NFO (New Fund Offer)?

Generally, the new fund offers of the AMC are well marketed. Investors can get the news of a new fund offer on various media channels and also through emails sent by the AMC to the potential investors. Any information regarding the NFO can be obtained from the website of the AMC. 

Subscription to the new fund offer can be done online as well as offline before the end of the offer period. The most common modes of investment in NFO can be through either of the following modes.

Things to keep in mind while investing in NFO Funds

Here are some points to keep in mind while investing in NFO Funds in India are:

  • NFOs are new mutual fund schemes launched by fund houses that offer great investment opportunities at low costs.
  • To understand an NFO, one should keep in mind asset class, which comes under the type of fund, its category, the launching AMC, the fund manager’s performance, fund’s philosophy, security selection process, among other factors.
  • It is essential to research the history of the AMC launching the NFO as the future performance of the fund depends upon it. A company with a good reputation can be trusted to offer good and consistent returns.
  • It is advisable to keep reviewing your portfolio at least once a year and check if the NFO is meeting your investment objectives and risk appetite.

Investing in NFOs on Fisdom

Fisdom is an app based investment platform where you can easily invest in New Fund offers on the go. All current NFOs are available for subscription on the app. All relevant info about the NFO is also available which can help you take an informed decision about investing in any particular NFO. 




NFO provides a chance to investors to maximise their returns and choose a favorable fund scheme based on various parameters like investment objective, maximizing returns, investment budget, etc. Investors have to consider many factors while choosing an NFO like the reputation of the AMC, minimum amount of subscription required, lock-in period, investment cost, etc. 




1. What is the maximum duration that the NFO can remain active in the market?
 The maximum duration that the NFO can remain active in the market is 30 days.


2. What is the basic difference between IPO and NFO?
 IPO refers to the initial public offer under which the investors can invest in the stocks of any company before it is listed in the market. NFO refers to the new fund offer where investors get the option to invest in a new mutual fund scheme for a period of 30 days from the launch of the NFO.


3. Is there a minimum subscription policy in NFOs?
 The criteria of a minimum subscription policy may or may not be part of any NFO depending on the policy of the AMC. If the AMC chooses to mention the minimum subscription clause it usually ranges from Rs. 500 to Rs. 5,000.


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