Motilal Oswal Mutual Fund to pause SIPs into international funds

Motilal Oswal MF will pause existing systematic investment plan (SIPs) and systematic transfer plan (STPs) into three of its international funds beginning April 1, 2022. This move comes in as the RBI has not yet increased overseas investment limits for mutual funds.

“There is no point in collecting money when you cannot deploy it,” says Harshvardhan Roongta, Chief Financial Planner, Roongta Securities. The money collected through SIPs in the last couple of months could not be deployed by such schemes due to restrictions and ended up lying as cash in the portfolio. In the case of index funds this will lead to a tracking error and subsequent underperformance.

All fund houses, as advised by industry body Association of Mutual Funds of India (AMFI) had stopped accepting lumpsum investments into schemes that investoverseas as the industry had reached close to its overall limit of $ 7 billion. Mutual fund schemes investing in overseas ETFs continue accepting investor money as this category has a separate limit of $1 billion, which is yet to be breached.

In January, Motilal Oswal Mutual fund had stopped accepting lump sum investments into three of its international funds namely Motilal Oswal S&P 500 Index Fund, Motilal Oswal Nasdaq Fund of Funds (FoF), and Motilal Oswal EAFE Top 100 Select Index Fund.

“Motilal Oswal Mutual Fund along with the rest of the industry, continues to engage with the regulators to increase these limits. As there is little clarity on when and by how much these limits would be raised, we have to take further steps to meet these regulatory criteria,” said the fund house in a note to investors. The existing mandates will remain in the system and will be automatically activated again when the schemes start taking fresh investments. The existing mandates will remain active in the system and will be automatically activated again when the schemes start taking fresh investments.

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