Only one international mutual fund remains open for fresh SIPs after 11 schemes shut doors

Investors looking to start a fresh SIP in an international mutual fund have just one option left after three fund houses suspended new registrations in a total of 11 overseas schemes this week due to regulatory investment limits.

PGIM India Mutual Fund suspended fresh subscriptions in three international fund of funds from 9 July, while Franklin Templeton stopped fresh SIP registrations in two overseas schemes on the same day. Edelweiss Mutual Fund followed by halting fresh SIPs and STPs in six international funds from the close of business on 10 July.

As things stand, Baroda BNP Paribas Aqua Fund of Fund is the only international mutual fund that continues to accept fresh SIPs as well as lump sum investments, although it too remains subject to the same overseas investment limits applicable to all fund houses.

The restrictions are not linked to fund performance. Instead, they stem from the overseas investment limits prescribed by the Reserve Bank of India.

The mutual fund industry can collectively invest up to $7 billion in overseas securities, with a separate $1 billion limit for overseas exchange-traded funds (ETFs). In addition, each asset management company has an overseas investment ceiling of $1 billion. Since the industry-wide limit was exhausted in early 2022, fund houses have largely been allowed to invest only within the overseas headroom that remained available to them as of 1 February 2022.

As individual AMCs exhaust this remaining capacity, they suspend fresh inflows into their international schemes to avoid breaching the regulatory limits.

Edelweiss said the move was necessitated because its available overseas investment headroom was nearing the permitted threshold. PGIM and Franklin also cited the overseas investment cap while announcing the restrictions. Existing SIPs and STPs, however, will continue without any interruption.

The latest closures do not affect investors who already have SIPs running in these schemes. Their existing instalments will continue to be processed as before. The restriction applies only to new SIP registrations, fresh STPs and, in most cases, fresh lump sum investments.

For investors seeking international diversification, the shrinking list of available funds means choices have become increasingly limited unless regulators revise the overseas investment limits or fund houses regain investment headroom through redemptions or changes in overseas exposure. Until then, Baroda BNP Paribas Aqua Fund of Fund remains the only dedicated international mutual fund currently open to fresh SIP registrations.

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