PGIM India MF allows fresh SIPs in international schemes

Fund houses stopped accepting flows into their international schemes in February 2022 as the limit set for the mutual fund industry to invest overseas was breached.

PGIM Mutual Fund has decided to allow investments in its schemes investing overseas through systematic investment plans (SIP) and systematic transfer plans (STP) along with lumpsum investments from July 3, 2023.

PGIM India Global Equity Opportunities Fund, PGIM India Emerging Markets Equity Fund, PGIM India Global Select Real Estate Securities Fund of Fund are the three schemes of the fund house which will accept subscriptions going forward.

Limits remain but headroom expands

Fund houses stopped accepting flows into their international schemes in February 2022 as the limit set for the mutual fund industry to invest overseas was breached. But later, the regulator Securities and Exchange Board of India (SEBI) permitted fund houses to accept money in their schemes investing overseas up to the headroom available without breaching the overseas investment limits as of February 1, 2022, at the mutual fund level.

This means if they were to sell their existing securities, that money can be reinvested in buying fresh shares or additional shares of existing holdings. That allowed many including PGIM MF open doors for fresh investments.

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In June 2022 PGIM MF allowed lumpsum investment of Rs 2 lakh per day per PAN basis in aforesaid schemes. The fund house had also allowed investments through already registered SIPs and STPs but did not allow fresh registrations of SIPs and STPs.

Opportunity in falling valuations

Things have changed a lot over the last year. Indian equities have outperformed many other equity markets. Many investors shifted their money to buying Indian shares. The fall in share prices of US-listed technology shares also hurt the popularity of these international funds, and also of technology-focused global funds launched in India. The subsequent sell-off led to headroom for many MFs compared to their investments as on February 1, 2022, as stipulated by SEBI.

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Explaining the rationale behind opening the schemes for further investments, Ajit Menon, CEO of PGIM India Mutual Fund, says, “Many stocks held in our international schemes’ portfolios are now available at a discount compared to a couple of years ago. Due to some redemptions, we have headroom and at the same time we see increasing interest to invest overseas among select pockets of investors.”

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PGIM MF has now allowed new SIP and STP registrations in the aforementioned schemes and has also removed the cap of Rs 2 lakh for lumpsum investments. Existing SIP and STP will continue and there is no restriction on redemptions, switch-in and switch-out of these schemes.

Should you invest?

Investors should allocate money to schemes investing overseas from a diversification point of view. It may help investors to participate in growth themes that are not available in India. Typically, the low correlation between developed markets equities and Indian equities can bring down volatility in a portfolio.

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Besides, this is a good time to enter select developed market equities, as market corrections provide a good, long-term opportunity. International equity schemes of Indian MFs on average have given 8.72 percent returns in the three years ended June 28, 2023. Many other fund houses are accepting inflows from investors in their schemes investing overseas. Investors need to check for limits if any imposed by the fund houses. Mutual funds are allowed to accept inflows till the time they hit the levels reached on February 1, 2022.