InvestorQ : What is the purpose of NFO and do NFOs also have a face value and premium; like IPOs?
Moii Chavate made post

What is the purpose of NFO and do NFOs also have a face value and premium; like IPOs?

Answer
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Sam Eswaran answered.
1 year ago


Normally, the NFO is issued at a face value of Rs.10 and the units are allocated accordingly. If you invest Rs.10,000, then you will be allocated 1000 units in the NFO with a face value of Rs.10 each. Normally, NFOs insist on a minimum investment of Rs.5000 during the NFO. Once the NFO is closed and the open-ended fund is open for subscription then investments as low as Rs.500 is accepted. NFOs do not impose any entry load on the investor and that is negotiated between the investor and the distributor.

There is one more thing that you must understand about the NFOs. There are broadly two kinds of NFOs that come out in the mutual fund market. The NFOs are predominantly debt funds (Fixed maturity plans) with a specific maturity. Equity NFOs are normally used when there is a specific theme like sectoral funds or thematic funds. In the absence of themes, there is no point in launching NFOs for regular diversified equity funds. That is why NFOs in equity funds are normally launched only in specific cases.