Alternate name: New fund offeringAcronym: 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:
