Mutual fund companies gear up for new fund offerings

Investors have had a break from a flurry of new fund offerings (NFOs) in recent months. However, this may end. Last week, five asset management companies (AMCs) filed draft documents for new fund offerings with securities market regulator SEBI.

Axis MF filed a long bond fund, Franklin Templeton MF for a balanced benefit fund, LIC MF for a multicap fund, Baroda BNP Paribas MF for a floating fund and Sundaram MF for a flexi cap fund.

SEBI had banned AMCs from launching new funds after it extended the deadline for stopping the pooling of funds and MF units by three months until July 1, 2022. Originally, AMCs had to comply to the SEBI circular on the pooling of funds and MF units by April. 1st 2022. In accordance with the updated deadline, stockbrokers, mutual fund distributors, investment advisors and other service providers involved in mutual fund transactions for their clients must cease to pool funds and/or mutual fund shares by July 1, 2022. Several other measures such as requiring two-factor authentication for online redemption requests, which were also part of the SEBI circular, are to be implemented from July.

According to the draft Axis Long Bond Fund scheme information document, the scheme will invest in debt securities such that the Macaulay duration of the portfolio is greater than 7 years. The scheme has been labeled “moderate risk” on the Riskometer with relatively low credit risk and relatively high interest rate risk. In accordance with the draft documents of the Franklin India Balanced Advantage Fund, the fund will actively manage its portfolio of equities and fixed income securities. The diet is labeled “very high risk” on the Riskometer. It will use a combination of qualitative and quantitative factors to determine asset allocation. In terms of quantitative parameters, the program will use the month-end weighted average P/E ratio and the P/B ratio of the Nifty 500 index, combined in a ratio of 50:50. The Baroda BNP Paribas Floater Fund, as its name suggests, will invest at least 65% of its net assets in floating rate debt securities (including fixed rate debt securities swapped for floating rate yields). The program is labeled “moderate risk” on the Riskometer.

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Dolores W. Simon