Baroda BNP Paribas Aqua reopened for fresh investments on September 1, according to Value Research. The fund invests in companies linked to the global water economy.
The limited availability of overseas mutual funds is not simply a matter of fund houses choosing to stop accepting money. It is largely linked to regulatory limits on how much Indian mutual funds can invest in overseas securities.
Indian mutual funds operate within an overall industry limit for overseas investments, along with limits applicable to individual schemes.
Fresh investments in several international funds were halted in 2022 after the industry came close to its overseas investment ceiling. The subsequent framework allowed schemes to accept fresh money based on the investment headroom available to them.
That has meant that reopening a fund depends on whether it has sufficient capacity under the applicable overseas investment limits.
The restrictions do not necessarily affect existing investors in the same way.
Value Research said 34 of the 59 funds that are currently closed to new investors continue to accept instalments from SIPs that were registered earlier. Another 25 have stopped accepting even these existing SIP instalments.
Some of the best-performing funds are unavailable
The restrictions also mean that recent strong performance in some overseas categories does not necessarily translate into an option for new investors.
According to Value Research, DSP World Gold Mining was the best-performing overseas equity fund in August, with a 30.3% gain. It was followed by Nippon India Taiwan Equity Fund, which rose 20.1%, DSP World Mining, up 17%, and ICICI Prudential Strategic Metal and Energy Equity Fund, which gained 15.3%.
All four funds were closed to new investors at the time of the analysis.
Mining and energy-focused overseas funds were among the strongest performers, gaining 17% in August and 75.8% over the previous year, Value Research said. US equity funds gained 4.2% in August and 30.7% over one year, while Asia and China-focused funds rose 3.4% and 35.3%, respectively.
The numbers, however, reflect past performance and do not indicate how these funds may perform in the future.
ETFs offer another route, but investors need to check the price
Investors who want overseas exposure can also consider ETFs listed on Indian exchanges. Unlike mutual fund schemes that can restrict fresh subscriptions, exchange-traded funds can generally be bought through the stock market when units are available for trading.
There is, however, another consideration: the price at which an ETF trades may be different from the value of its underlying holdings.
Value Research found that some overseas ETFs were trading at premiums of more than 20% to their net asset values (NAVs) as of September 2.
For example, the Motilal Oswal NASDAQ 100 ETF had an NAV of ₹270.56 but was trading at ₹328.83, a premium of about 21.5%. A high premium means an investor buying the ETF on the exchange is paying considerably more than the reported value of the underlying portfolio.
This makes the choice of route important. A mutual fund may not be accepting fresh investments, while an ETF may be available but trading at a significant premium to its NAV.
