NJ India Made a Record in Maiden NFO

The most recent entrant to the mutual fund space, NJ India Mutual Fund has raised a record Rs.5,200 crore from its maiden NFO of the NJ Balanced Advantage Fund. This is the highest amount ever collected by any maiden NFO by any fund. NJ has been one of India’s top ranked independent mutual fund distributors and that network helped substantially.

For more than 14 years, the record for the highest collection by a mutual fund in its maiden NFO was held by Pinebridge, which had collected Rs.1,104 crore in May 2007.

By that comparison, the maiden NFO by NJ India Mutual fund has collected nearly 5 times the amount. NJ has a larger goal of launching a family of passive funds in India.

NJ India has one of the best agent networks for mutual funds and is the highest commission earning distributor outside of the distributing banks. The NFO leveraged the massive network of over 8,000 distributors of NJ Finvest to sell the NFO.

In fact, NJ was the first case of a pure mutual fund distributor integrating forward towards mutual fund origination.

The NJ Balanced Advantage Fund was obviously influenced by the incredible success of the SBI MF Balanced Advantage Fund. Typically, these balanced advantage funds are also called dynamic allocation funds.

They set a base allocation for equity and debt and then have a rule based reallocation shifting allocations sharply. For example, one rule can be that if PE crosses above a threshold then equity exposure will be cut. It is largely passive in nature.

In the last few months, some of the NFOs have managed to collect huge sums of money. For example, the record NFO collection was by SBI MF Balanced Advantage Fund, which collected a record Rs.14,500 crore. This was followed by the NFO of ICICI Prudential Flexi Cap Fund which collected Rs.9,500 crore.

Check - Flexi Cap NFO

The NJ MF NFO is significant for a number of reasons. Firstly, it will be a test of how much investors are willing to rally behind a new mutual funds. That has been answered.

The second question is whether there is a market for passives. In fact, if you look at the mutual fund AUM, then hybrids and passives today account for over 25% of the total AUM. It appears there is room for passives and NJ may in the right place at the right time.