Five months on, some mutual funds reopen subscription to global funds

A few asset management companies (AMCs) offering schemes that invest in overseas stocks have started accepting fresh inflows from investors after a gap of nearly five months.

Edelweiss AMC on Monday said it has revoked the temporary suspension in seven of its international offerings with effect from June 21.

ICICI Prudential AMC, too, approved resuming subscriptions in five of its schemes with effect from June 22.

On January 31, markets regulator Securities and Exchange Board of India had directed AMCs to stop accepting fresh inflows into overseas schemes after the $7-billion industry-wide investment threshold got breached.

While the investment ceiling hasn’t been raised, the turmoil in the market seen this year has once again created investment legroom.

Industry body Association of Mutual Funds in India on Tuesday clarified that AMCs can utilise the headroom available in the overseas investment limit created due to redemptions and consequent sale of overseas securities after February 1.

It further said that the total utilisation of the overseas investment limit by each AMC shall remain capped at the amount as of February 1.

As a result, not all AMCs are able to reopen fresh subscriptions.

In a note on Tuesday, Motilal Oswal AMC, which had to stop investments in five of its international schemes in February, said, “We would like to inform that we have not had major redemptions in the past few months since these restrictions were applied, resulting in no additional room for accepting fresh investment in any of our international funds.”

The ban on fresh investments in overseas schemes has come as a blessing in disguise for investors. Most global markets, particularly the US, have dropped more than 20 per cent since January amid a hawkish pivot by central banks to curb inflationary pressures.

Data from Value Research shows the total assets under management (AUM) for the international funds category has declined from Rs 42,689 crore at the end of January to Rs 38,999 crore in May. AUMs have declined further as markets have seen a sharp fall this month.

Experts said the reopening of subscriptions is positive news for the industry, as well as investors who would want to make use of this correction to deploy fresh funds.

“This is positive news for the industry as markets have corrected and there is scope for investing in overseas securities. The industry might get additional flows between Rs 3,000 crore and Rs 4,000 crore in the days to come. However, we expect the regulator to soon take some decision on raising the overall investment limit,” said an executive from a leading fund house.