There were several media reports which say the MF industry has been banking on the current rally by launching NFOs.
Of late, the Rs.36 lakh crore MF industry has seen many NFOs launches. While the number of schemes in the categories has gone up due to NFOs, there is scope of many more NFOs in the days to come. Let us place the numbers in a proper perspective.
Currently, there are 355 schemes across 11 equity fund categories as on July 2021. The highest number – 110 is obviously in sectoral/thematic category. Other categories with relatively higher number of schemes are ELSS with 42, large Cap with 33 and large & mid cap funds with 28.
In June 2021, there were 351 funds. This indicates the MF industry has added 4 funds in a month’s time. In May 2021, there were 348 funds. That is, over the last two months, 7 funds have been added through NFOs, which is just a percentage of existing number of schemes in the equity fund category.
On debt, the industry has 317 schemes across 16 categories as on July 2021. The categories with higher number of schemes are liquid (39), overnight (30) and ultra short (28). In June 2021, there were 313 debt funds. There were no launches in May 2021. Overall, the industry added 4 funds in two months – 2 in floater, 1 each in dynamic bond and medium duration.
Further, across 6 hybrid fund categories, the total number of funds have actually dropped from 140 in end-June to 138 in end-July 2021. We have one fund less in arbitrage and BAF categories.
Total number of open-ended funds, including ETFs and solution oriented are 1043 in the end of July 2021. This is up from 1032 in June 2021 and 1027 in May 2021. Hence, the total open-ended funds have moved up by 16 schemes in two months. So practically, unlike previous bull runs where the industry witnessed many new launches, we have seen very less number of NFOs thanks to scheme recategorization by SEBI.
Conclusion
Sometimes, there is a difference between what appears optically i.e. in front of our eyes, and reality. While we may think that the industry has come out with many NFOs, the number is not high when compared to the existing number of schemes.
The universe for selection is of course high and there is where role of MFDs come in handy.
Today, we have thousands of channels on TV but nobody complains as to why so many channels are there on offer. We know which ones to watch. Similar is the case with mutual fund schemes.
Source: https://cafemutual.com/news/guestcolumn/556-have-we-seen-too-many-nfos