InvestorQ : How do units get allocated after the NFO issue? Is it like an IPO only?
Moii Chavate made post

How do units get allocated after the NFO issue? Is it like an IPO only?

Answer
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Sam Eswaran answered.
1 year ago


It is important to grasp the difference between equity IPO listing and NFO price. When an AMC collects fresh funds through NFO, it is invested in equities, debt and liquid assets. Therefore, the NAV of the fund will be based on the market value of the investments. In case of equity fund NFOs, the starting NAV is lower than the face value because regulatory and administrative expenses pertaining to the NFO are debited to the fund. Hence the NAV of the fund will be lower to that extent. If you look at the list of AMCs coming out with equity fund NFOs, you will find names like Canara Robeco, IDBI MF and Union Fund etc. These AMCs are looking at NFOs to increase their assets under management (AUM), which is why NFOs matter to them. Investors need to be cautious about investing NFOs as most of them may not have a track record and are in untested waters.