What Is a New Fund Offer (NFO)?

Definition and Examples of New Fund Offer

A new fund offer (NFO) occurs when a new fund is offered through an investment company to raise money from public investors. An NFO only lasts for a set period of time, and you must buy a set amount of units to participate in one. The price is set by the investment or asset management company offering the new fund.

• Alternate name: New fund offering
• Acronym: NFO

How a New Fund Offer Works

An NFO works in a couple of different ways, depending on the type of fund. 

When a new fund is created, it goes to an investment or asset management company to launch. Some new funds have more marketing and buzz compared to others, depending on the fund. As a potential investor in the new fund, you’ll get to review the types of securities in the fund, the fund manager, and any company information.

Each type of fund works slightly differently when it comes to an NFO:

• Open-end fund: These types of NFOs don’t limit the number of shares you can buy. They aren’t traded on an exchange. You buy or sell the shares on launch day—or any time after—through a brokerage firm or online trading account. You’ll see net asset values (NAV) every day after the market closes.
• Closed-end fund: These funds limit the number of shares you can buy during a new fund offering. Closed-end funds trade on an exchange, and you’ll get daily price quotes all day. You’ll purchase closed-end funds on launch day through an online trading account or a brokerage firm.
• Exchange-traded fund: ETFs can be publicly traded on the stock market and go through a new fund offering first.

NFO vs. IPO

A new fund offer is like an initial public offering (IPO), but a few features show how they operate differently. Both come with pros and cons:

Pros and Cons of New Fund Offerings

Pros Explained

• Diversification for your portfolio: Investing in many different securities and funds may help lower your overall investment risk. Putting your money into a new fund offering allows you to diversify your investments even more.
• Funds may be safer investments than stocks: Stocks are one of the riskiest investments, even though, historically, they have shown to yield higher returns. Investing in a fund may be a better option for investors who don’t want to take that big of a risk.

Cons Explained

• Minimum subscription offer: Buying an NFO means you’re putting money into a minimum subscription offer. This means you have to buy a specific number of units (like shares) to participate in the NFO—you'll also have to leave the money in the fund until the maturity date. You may need to put more money in than you would compared to buying a traditional stock or another type of security.
• New funds may come with higher risk compared to existing funds: While funds are often seen as less risky compared to stocks, a new fund offer is still new. That means there’s no existing track record of how the fund has historically performed.

How to Find New Fund Offers

You can find new fund offers to invest in by scanning investment or asset management company websites. NFOs will likely be announced in advance so that investors can decide whether they want to invest and add the fund to their portfolio. You may also be able to invest through your usual brokerage.