It has been an open question whether it is advantageous to invest in New Fund Offers (NFOs). At least theoretically, it is expected to be advantageous if the NFO focuses on hitherto neglected investment avenues, otherwise similar existing schemes should be preferred. Using a comprehensive database of Indian mutual funds, we empirically examined 295 new funds launched by various Asset Management Companies during the period 2003 to 2008. The analysis using various benchmarks reveals that debt oriented new funds provide significantly higher returns in the short run as well as in the long run, where as balanced and equity oriented funds found to be offering better returns only in the case of long investment horizon.
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