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What is NFO?

A new fund offer or NFO of mutual funds is a first-time subscription offer for a new scheme launched by an asset management company. The new fund offering by a mutual fund house can be launched around a theme or simply to complete their product basket offering. Please note that a mutual fund company can have only one scheme under a category or theme. After the new fund offering, provided it is an open ended scheme, is over, the fund will reopen for subscription again and investors can invest in the same at the prevailing net asset value (NAV).

If the NFO is a closed ended scheme, the fund will not open for subscription again. Mutual fund investor who subscribe to new fund offering of a close ended mutual fund scheme has to remain invested in the fund till the scheme maturity date.

Generally units are offered at Rs 10 during the NFO period.

Investors should consider the following before investing in a mutual fund NFO –

Reputation of AMC – How long the AMC is in existence is most important as you know the track record of the AMC.

Scheme objective – Do not rush to invest in a NFO unless the objective of the scheme matches with your investment objective and investment time horizon.

Risk Factor – Read the risk factor and check if it matches with your risk profile.

Expense ratio – You must check the scheme expense ratio as lower the expenses, higher would be the returns.

Benefits of Investing in NFO?

An investment in new fund offering in a mutual fund can help you invest in new themes and sectors, diversifying your portfolio, invest in reputed AMCs in which you may not have any exposure and invest in close ended funds and get locked for the long term, etc. Let us check some of the benefits –

Invest in new ideas – Through a mutual fund new fund offering you may come across interesting ideas/ themes which is completely new and you may like to invest in it.

Diversify your portfolio – You may like to invest in a NFO launched by a reputed mutual fund house but you have neither invested in a scheme of that category and / or have no exposure in the said fund house.

NFO by a new reputed AMC – You may like to invest in a NFO which is launched by a new fund house with a good pedigree and you would like to test the fund manager’s skill set by investing in the new scheme.

Lock investments for a long term – If the NFO is a close ended fund, you may like to invest in it, provided it matches with your risk profile and investment time horizon, for the long term. The reason is that the investments are locked-in and you will not be able to redeem it even if you are tempted to. In other words, remaining to invest for the long term gets you good return over the years.


A mutual fund NFO is similar to a share IPO (initial public offering) in a sense that both are launched with an objective to raise money from the public. While money collected through mutual fund NFO is invested as per the scheme objective and endeavour to generate returns for the investors, the money collected through share IPO is invested in the company for business growth.

A mutual fund company can launch open ended and close ended schemes through new fund offering. However, a close ended fund cannot be subscribed again after the NFO period. But open ended schemes can be bought or sold at the prevailing NAV post the NFO.

A mutual fund company can have only one scheme in each fund category. Therefore, the AMC can launch a NFO only if any scheme does not exist in the particular category.

During the NFO, NAVs are generally allotted at par value of Rs 10.

A mutual fund new offering is generally open for 15 days from the date of launch.

All close ended funds will have a maturity date. Units are redeemed automatically on the maturity date and the proceeds are credited to investor’s bank account

You need to be mutual fund KYC compliant. Read the details of the NFO in the scheme offer document (SID) and Key information memorandum (KIM) released by the AMC, before investing.

An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund.
For information on one-time KYC (Know Your Customer) process, Registered Mutual Funds and procedure to lodge a complaint in case of any grievance Click Here.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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