Smallcaps to smart beta: March sees diversified mix of new fund offers

• NFO launches surged amid West Asia conflict and market volatility
• Arbitrage, thematic, and factor-based funds dominate new NFOs
• Experts suggest cautious allocation of 5-10 percent to NFOs

Did our AI summary help?

The February-March 2026 period has witnessed a noticeable surge in factor-based, arbitrage-oriented, thematic and sectoral new fund offers (NFOs). These NFOs reflect how fund houses are positioning themselves amid the ongoing war-like situation in West Asia.

As the US-Israel-Iran conflict escalated, equity benchmark indices Sensex and Nifty extended losses on Monday, following global markets. Participants expect a weak start when the market opens for trade on March 4.

According to the Association of Mutual Funds in India (AMFI), 14 new fund offerings were launched from February to early March 2026. But should investors rush for NFOs when the market is volatile, and risk is high?

NFOs are launched to attract investors with new strategies, themes, or niche opportunities spanning across equity, debt, hybrid, and sectoral categories.

The current NFOs show a rise in arbitrage, thematic, and factor-based funds, according to data from February to March 2026.

The latest NFOs seek to gather shareholders’ focus across thematic, factor-based (Smart Beta), and arbitrage funds, which can be explored on a limited basis, with an allocation of 5-10 percent.

Arbitrage funds are equity-oriented schemes that allow investors to profit from price discrepancies. Factor-based funds invest in stocks using certain pre-set filters or rules to build portfolios.

Thematic funds invest across multiple sectors. According to the latest AMFI data, there are 240 thematic (and sectoral) mutual funds with a total assets under management (AUM) of Rs 5,237.43 lakh crore as on January 31.

NFOs: How to pick funds during war-induced volatility?

“In a market shaken by geopolitical conflicts, NFOs provide a strategic clean slate for investors,” said Anup Bhaiya, the founder of Money Honey Financial Services, adding that fund managers can pick up quality stocks at distressed prices during periods of volatility.

He reasons that, as existing funds are tethered to past high-valuation entries, NFOs allow fund managers to deploy fresh capital directly into the current correction, picking up quality stocks at distressed prices.

“Funds like Capitalmind Multi Asset Allocation and Motilal Oswal Multi Factor Passive FoF are designed for exactly this volatility. Diversifying into gold and energy or commodities, which spike during Middle East conflicts, provides an organic hedge that pure equity funds lack,” said Bhaiya.

He argues that these NFOs ultimately offer a disciplined way to move from ‘panic’ to ‘process’, allowing investors to buy the fear while structurally protecting the downside through asset allocation.