Fewer new fund offers from old fund houses now1 min read . Updated: 17 Dec 2012, 09:23 PM IST
Sebi has also made it tougher for fund houses to launch new schemes without a proper justification
While the verdict of the entry load ban by the capital markets regulator, Securities and Exchange Board of India (Sebi), in 2009 is still being debated as to whether it was needed or not, one key benefit was the curb on new fund offer (NFO) launches. When entry load (typically 2.5% of the investment value was the standard in those days) was abolished, fund houses found it tougher to introduce new schemes and get distributors to sell them because the fund houses were then forced to shell out distributor’s commission from their own pockets. Earlier, fund houses could spend as much as 6% (for new schemes only), but not any more.
Besides nudging fund houses to merge their schemes to bring down the total number of offering to a more manageable level, Sebi has also made it tougher for fund houses, in recent years, to launch new schemes without a proper justification. Only when fund houses demonstrate that the new launch is different from its existing options does the new scheme get Sebi’s approval.
Mint Money decided to take a look at the NFO launches by various fund houses from 2004 till date. Which fund houses have launched the most number of schemes, not just year-on-year, but also overall from 2004 till date? To be fair, fund houses that have a long track record have slowed their launches in recent years. Newly set-up fund houses, on the other hand, show a higher figure in recent years, to be able to complete their product suite. We took fund house-wise data from Value Research, one of India’s largest MF tracking firms, and mixed and matched the numbers to showcase different facets of the NFO game. We have taken equity and debt schemes in our analysis, but omitted fixed maturity plans, capital protection-oriented schemes and interval schemes. Here is what we found.