New fund offers (NFOs) are aplenty in the mutual fund (MF) market. Investing with

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experienced MF managers is a time-tested strategy, which enables an investor to more easily learn about the managers and establish a comfort level. New funds with new ideas often deliver impressive growth right out of the box. So, the big question is, should you invest in rookie funds? Financial Chronicle spoke to experts who list out five things to look for when one gets an equity NFO pamphlet.

Look before you leap, says Srikanth Meenakshi, director at Wealth India Financial Services. While investing in a new fund is often likened to taking a shot in the dark, smart investors should not be swayed by first impressions. "Although an equity mutual fund might be new, it is quite possible that it is being run by an experienced fund manager with a long track record," Meenakshi said. If the NFO will be run by an experienced fund manager, investors should try to find out how the manager has done in previous funds in both bull and bear markets.

Ratings, if available, from independent agencies such as Value Research and Morningstar, as well as advice from your financial planner, can help. “The fact is that today the qualities of NFOs are clearly differentiated. Sebi (Securities and Exchange Board of India) has put some brakes on NFOs by asking how they are different from older funds and is demanding that funds differentiate from their existing funds. There has to be something new in a new fund offer," said Dhirendra Kumar of Value Research, a fund tracker.

The NFO document is a valuable source of information. To learn about the fund, an investor can read the prospectus to find out more. While existing funds can be analysed in terms of its benchmark through returns, alpha, beta and turnover — the NFO document will share details on fund strategy and its risks. Existing equity funds can be differentiated in terms of being index funds, pure large-cap funds, pure mid-cap funds, flexi-cap funds, value- style funds, global funds, theme-based funds, sectoral funds, tax-saver funds, as well as balanced funds, said Rakesh Jha, director of MoneyTime Advisors.

The type of asset management company (AMC) from where the fund is coming is also very important. Sanjay Das, a certified financial planner, says investors should thoroughly review information about the fund house. “AMCs often specialise in small-cap, growth, value, or some other strategy. Names, such as Growth/Series I and Growth II generally denote situations where strategies are similar," Das added.