The Securities and Exchange Board of India (SEBI) has ensured that New Fund Offerings (NFOs) are no longer the profitable propositions for Asset Management Companies (AMCs) that they once were.
In 2006, SEBI disallowed open-ended schemes from charging initial issue expenses from the scheme’s NAV. Till then, taking these expenses from the NAV (which effectively meant getting investors to pay them) was a widespread practice. Following this ruling, only close-ended schemes would be allowed to charge initial issue expenses from investors.
But markets were on a roll and AMCs were not going to let the opportunity to raise their Assets Under Management (AUM) slip. In the last quarter of 2007, with Indian bourses at their peak, 20 new equity funds raised Rs 16,200 crore. Half of them were close-ended, accounting for 68 per cent (Rs 9,397 crore) of the total collection.
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In 2008, SEBI scrapped the amortisation charges for close-ended schemes as well. So, the cost of launching a new fund could no longer be passed on to the investor. If that was not disappointing enough, we had the market collapse too.
But going by the recent launches and the offer documents submitted to SEBI, it now appears that AMCs are going all out once again.
IDFC Mutual Fund (MF) has one in the offing, and has already launched five schemes this year: IDFC Classic Equity Plan B, IDFC Imperial Equity Plan B, IDFC Premier Equity Plan B, IDFC Strategic Sector (50-50) Equity Plan B, and IDFC India GDP Growth.
Reliance MF is fairly aggressive with six in the pipeline, spanning index funds, a fund of funds (FoF) as well as a fund which will invest a minimum of 65 per cent in global equity and a maximum of 35 per cent in Indian equity.
DSP BlackRock MF is looking at expanding its portfolio only by introducing sector-specific funds, that too for investors looking at a global option. In March 2008, it launched the DSPBR Natural Resources and New Energy Fund. The timing could not have been worse and the fund has remained a tiny offering with just Rs 190.31 crore of AUM, as on April 30, 2009. Now it plans to launch the DSPBR World Energy Fund and DSPBR World Mining Fund, both targeting the energy sector, but with a global tilt. In fact, they are siblings to the existing DSPBR World Gold Fund.
Edelweiss MF launched Edelweiss Diversified Growth Equity (E.D.G.E.) with three plans. Two fund houses launched Shariah schemes while JM MF and Deutsche MF launched two schemes each.
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