Dear MF Investors,
This is to inform you that as per recent directives from the Securities and Exchange Board of India (SEBI), Association of Mutual Funds of India (AMFI) has been adviced to stop accepting inflows into funds that invest in foreign exchange traded funds (ETFs) from April 1, 2024. This circular came after the Mutual Fund investments have exceeded SEBI’s $7 Billion cap on foreign investments.
Background:
On November 5, 2020, SEBI first imposed limitations on overseas investments for Mutual Funds, with a maximum of $600 Million per fund and an industry-wide limit of $7 Billion. This limit was later changed on June 3, 2021, enabling funds to invest up to $1 Billion per fund house within the $7 Billion industry cap.
On February 1, 2022, some Asset Management Companies (AMCs) announced restrictions on new subscriptions to their foreign funds, with the exception of those investing in overseas ETFs owing to industry-wide regulations. However, due to the recent corrections in global markets in 2023 leading to decline in international stock valuations, 95% of this $7 Billion limit is already hit.
How will this impact you?
Based on our previous observations, here is an outline of how these developments may affect investors.
- Investors will be unable to make new Lumpsum Investments, nor will they be able to set up new SIPs (Systematic Investment Plans) in ETFs that invest internationally or corresponding FOFs Plans.
- Existing SIPs in International ETFs or corresponding FOFs Plans Some AMCs will also not take any fresh investments. Existing investments in SIPs will remain unaffected.
- However, investors can continue to redeem their investments from these schemes.
We’ll ensure to keep you informed of any further developments, including details on the schemes impacted.
Happy Investing,
Saurav Parui