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Distributors Not Hot About NFOs

Despite being hit by entry load ban, fund houses push for NFOs

This article appeared in the 15 December - 14 January, 2009 edition of Mutual Fund Insight.

If you have been reading newspaper reports you would well aware that asset management companies (AMCs) have been hit by the ban on entry loads. Distributors are not selling aggressively and fund sales have taken a beating. But in no way has that come in the way of AMCs launching new fund offerings (NFOs).

The entry load ban came into effect on August 1, 2009. Ever since then, there have been 24 equity fund offers filed with the market regulator, the Securities and Exchange Board of India (SEBI). Looking at the period prior comparatively, the five months spanning March to July 2009 had 27 NFOs filed. Of the NFOs launched since the entry load ban, the public sector theme has caught the fancy of two fund houses with them launching focussed thematic offerings: Religare PSU Equity and Sundaram BNP Paribas PSU Opportunities. Funds with an international flavour have also caught on with DSPBR World Mining Fund and Mirae Asset China Advantage Fund.

Despite their enthusiasm to launch new schemes with the market being revived, the AMCs don’t have it easy. The lack of entry load has not got over-eager distributors pushing the schemes. The total NFO amount raised post the entry load ban has been just around Rs 268.64 crore. But in the March to July period it was a much weightier Rs 4,056.64 crore. Part of the reason could be investors not wanting to burn their fingers after the market carnage of 2008, while a large part could very well be distributors not eager to push fund products enthusiastically.