The Year of NFO’s has Finally Come to an End. Phew!
Dec 31, 2018

Chart 1: Number of NFO's launched by mutual funds houses

Table 1: NFO Scorecard of Mutual Fund Houses – In terms of number of schemes launched in 2018

Surprisingly, mutual funds garnered about Rs 1,25,000 crore through NFOs in 2018. That too at a time when many of their existing schemes have been struggling to generate alpha over their benchmark.

Instead of trying to improve the performance of existing funds, many fund houses were busy launching new funds. Aren't they confident enough to attract investors through the track record of their existing schemes, instead of trying to sell on the novelty factor?

While it is not wrong to come up with NFOs (if it's a unique proposition), what worries me is that many new funds have been assigned to the fund managers who are already managing 5-7 schemes or even more.

I do not think it is right to burden the fund manager/s more when they are already under pressure to improve the performance of his/her existing schemes. Naturally, the fund manager may lose focus on existing ones and may even lack the capacity to manage them efficiently. Not in the best interest of investors, in my opinion.

I just hope AMCs are not under pressure to garner more AUM just for the sake of increasing their revenues, so that the salaries and incentives of their CEOs and top executives can be justified.

Hope the New Year 2019, makes the fund house more responsible. Instead of being in the race to garner more AUM, they should pass some resolution of focusing on improving performance, which will be in the best interest of investors.

Let us see what measures the regulator takes to apply the brakes on the NFO machines. Probably it should be strict and define a limit to the number of schemes a fund house can launch in a year.

While there is already a plethora of funds for one to choose from, picking the right one may be difficult for you. That is where PersonalFN's unbiased research backed by comprehensive rating methodology can help you select winning mutual fund schemes to meet your goals.

PS: PersonalFN's exclusive report 5 Undiscovered Equity Funds may help you pick some hidden gems that are capable of generating big gains over the next 3-5 years.

These 5 high potential funds, recommended in the report, have passed through a stringent scheme selection criteria set by PersonalFN, and can be considered for investing in current market conditions.