NFO (New Fund Offering) is like an invitation to the investors to put their money into the mutual fund scheme by subscribing to its units. It is similar to an initial public offering as both attempts to raise capital for further operations of business. However, unlike an initial public offering (IPO), the price paid for shares or units is often close to a fair value.
After the placement of 3–tier structure, the AMC launches new schemes after getting approval from the Trustees and SEBI in the name of the Trust, this launching of a new scheme is known as a New Fund Offer (NFO).
With the launching of this scheme the distributors talk to potential investors and collect money from investors by way of cheques purchased on-line through a number of intermediaries who offer on-line purchase / redemption facilities.