SEBI directs AMFI to cease new investments in overseas ETFs due to breach of upper limit of USD 1 billion
Starting from April 1, 2024, the fund of funds (FoFs) investing in ETFs and ETFS investing in international markets will need to stop accepting new investments.
SEBI has directed AMFI to halt new investments in overseas ETFs due to an impending breach of the upper investment limit of USD 1 billion. The directive, issued on March 20, 2024, comes as the RBI's prescribed limit for overseas investments by mutual funds in ETFs approaches its threshold of USD 1 billion, out of a total industry-wide limit of USD 7 billion.
Starting from April 1, 2024, the fund of funds (FoFs) investing in ETFs and ETFs investing in international markets will need to stop accepting new investments. This measure is in line with regulatory efforts to ensure compliance with RBI's foreign investment limits.
A breach of the upper limit in February 2022 had previously resulted in a suspension of fresh inflows. However, following a market correction in 2023, which lowered international stock valuations, the RBI temporarily relaxed restrictions, allowing for renewed inflows with certain constraints. Some fund houses took advantage of this relaxation to resume accepting investments. However, the ETF category is now approaching its USD 1 billion threshold once again.
Among the approximately 70 overseas investing schemes, the Motilal Oswal Nasdaq 100 FOF is the largest scheme, with investments totaling Rs 4612.29 crore. The Mirae Asset NYSE FANG's FoF and ETF variants were top-performing funds in 2023, delivering remarkable returns of around 100% for the year.
In a related development, Nippon India Mutual Fund changed on February 26, with four of its funds, including Nippon India US Equity Opportunities and Nippon India Japan Equity, halting new investments. However, existing registered Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) remain unaffected.
Disclaimer: The article is for informational purposes only and not investment advice.