No New Mutual Fund Offers Till 1 July

The Securities and Exchange Board of India (SEBI) had discontinued the launch of new mutual fund schemes until the new systems concerning pool accounts were determined. 1 July is the deadline for the implementation of the new system. And the fund houses are preparing to introduce new schemes.

Previously, the mutual fund industry had agreed that there would be no new fund launches until a new system was implemented. As the industry could not comply with the 31 March deadline, the industry had sought an extension.

The launch of new fund offers (NFOs) was discontinued for the last few months; it will probably resume again on 1 July. As per industry experts, SEBI may permit NFOs only after the Association of Mutual Funds in India confirms that the new processes are in place. On the other hand, mutual fund houses are ready with the NFOs they intend to launch once the ban is lifted. Five fund houses have filed for new funds with SEBI the last week. 

SEBI had instructed mutual fund houses to make sure no online platform, mutual fund distributor, investment advisor, or stockbroker pools an investor’s money in a bank account and then transfers it to a fund house for purchasing units of schemes. This was done to make sure money was not getting misused.

In terms of NFO collections, the mutual fund industry collected about Rs 96,000 crore worth of investor flows via NFOs alone. Most fund launches were exchange-traded funds (ETFs) or index funds with sector orientation or theme-based focus. ETFs and Index are the only two categories where the one scheme per category rule did not apply.

As per financial planners, even after the new fund launches go live, as an investor, it’s recommended that you avoid engaging in too many NFOs. Staying with your existing funds with a long-term track record is better. Generally, 8 to 10 funds are sufficient to take care of your investment needs and diversify your investment portfolio. An ideal core portfolio could be a combination of small, mid and large-cap funds and a few debt funds. Theme-based or sector funds could be part of your satellite portfolio, however, in a limited manner.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@clear.in

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