Mutual funds can again accept money in international schemes

Sebi has allowed mutual funds to accept fresh money in international schemes to the extent of the overall industry limit of $7 billion. In a letter to industry body Association of Mutual Funds of India (AMFI), the capital markets regulator said asset managers may resume subscriptions and make investments in overseas funds or securities ‘up to the headroom available without breaching the overseas investment utilization limit’.

Some mutual funds may however not accept investor flows in these products due to lack of clarity over the limits available.

While there is no estimate of the redemptions in international schemes, mutual fund officials and distributors speculate the headroom to accept fresh flows could be low. This is because international schemes did not witness sharp outflows amid the correction.

“We estimate that the total headroom for the industry will be just 2-3% of the $7 billion limit,” said the CEO of a domestic fund house. This means the industry will be able to add just 800-1200 crore of international assets.