Investors using systematic investment plans (SIP) and systematic transfer plan (STP) to invest in three international schemes of Motilal Oswal Mutual Fund (MOMF) can’t continue with their investment plans anymore. MOMF has decided to stop the existing SIP and STP in three schemes - Motilal Oswal S&P 500 Index Fund, Motilal Oswal MSCI EAFE Top 100 Select Index Fund and Motilal Oswal Nasdaq 100 Fund of Fund. The fund house has notified that no existing SIP or STP will be accepted or processed after the closing hours of March 31, 2022.
The fund house had stopped lumpsum investments in these three schemes after the closing hours of January 14, 2022. The fund house decided to temporarily stop the lumpsum investments in these schemes as the limit offered to mutual funds for overseas investments was nearing. The fund house now stops the staggered investments as well. “The existing registered SIP or STP would remain active in the system and shall be reactivated after the receipt of further communication of enhancement of limit by Regulators in this regard,” the notice from the fund house stated.
In January 2022, Association of Mutual Funds in India (AMFI) also asked the mutual fund houses to stop accepting fresh lumpsum investments in schemes dedicated to investing in overseas stocks. The industry body has also asked the mutual funds to stop accepting fresh systematic investment mandates from the investors. This suspension will be applicable from Wednesday – February 2, 2022.
The capital market regulator, Securities & Exchange Board of India (Sebi) had set up a limit of US $1 billion per fund house and US$7 billion for the mutual fund industry. Further, there is a separate limit of US $1 billion for mutual fund schemes investing in exchange traded funds listed overseas. Sebi can hike this limit after consulting with the Reserve Bank of India.
As far as the existing investments in units of aforementioned schemes of MOMF are concerned, there is no impact. The investors can switch out or redeem from these schemes. The investors can also buy and sell units of exchange traded funds investing in overseas stocks on the stock exchange, as this does not mean incremental investments overseas by mutual fund.
Jignesh Shah, Founder of Capital Advisors says, “Investors should hold on to their existing investments. If they are keen on investing overseas, then they can consider buying units of Motilal Oswal NASDAQ 100 ETF or Mirae Asset S&P 500 Top50 ETF among available options.” A diversified index such as S&P500 is always better than NASDAQ100, he adds.
According to Value Research, international funds as a category has given 12.85 percent returns over three years. Motilal Oswal NASDAQ 100 ETF is the largest scheme with an assets under management of Rs 5,726 crore and has given 28.86 percent returns over the last three years.
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