Looking to invest in international funds? Only one scheme remains open for new investors amid fresh subscription curbs

Indian investors looking to diversify their portfolios through international mutual funds have fewer options again. A fresh suspension by Invesco Mutual Fund has left just one scheme accepting new systematic investment plan (SIP) registrations, while another continues to accept only lump-sum investments.

The latest restrictions also affect investors who already have SIPs running in three Invesco international schemes. From November 4, the fund house has stopped accepting instalments under existing SIPs in its Invesco India Pan European Equity Fund of Fund (FoF), Invesco India Global Equity Income FoF and Invesco India Global Consumer Trends FoF, according to Value Research. The suspension also covers fresh SIP registrations and switch-in transactions.

Which international mutual funds are open for fresh investments?

As of November 4, only two international mutual fund schemes were accepting fresh investments, according to Value Research. However, only one of them was allowing new SIP registrations.

Baroda BNP Paribas Aqua FoF is currently the only scheme accepting both fresh lump-sum investments and new SIP registrations. PGIM India Global Select Real Estate Securities FoF is accepting lump-sum investments but has kept fresh SIP registrations closed.

The three Invesco schemes have stopped accepting fresh investments through lump-sum purchases and SIPs. Their existing SIP instalments have also been paused from November 4.

What happens to existing SIPs in Invesco funds?

Investors who have already registered SIPs in the three Invesco schemes do not need to cancel their mandates immediately.

Invesco has said that existing SIP registrations will remain in place and instalments will resume once the suspension is lifted. However, instalments falling due during the suspension period will not be processed.

This means investors may temporarily miss their planned investments, affecting the continuity of their investment schedules. They should check the fund house’s subsequent notices for updates on when instalments will resume.

The development also highlights why investors should distinguish between a temporary suspension of fresh registrations and the cancellation of an existing SIP. The two have different implications for their investment plans.

Why are international mutual funds restricting investments?

The restrictions are linked to regulatory limits on overseas investments by Indian mutual funds.

The Securities and Exchange Board of India (SEBI) has prescribed an industry-wide limit of $7 billion for investments in overseas securities, excluding overseas exchange-traded funds (ETFs). A separate $1 billion limit applies to overseas ETFs. These limits were introduced to regulate the mutual fund industry’s exposure to foreign markets.

When a fund house approaches its permitted overseas investment limit, it may restrict fresh subscriptions to avoid breaching the ceiling. Consequently, investors may find that a scheme accepting investments one month has stopped doing so the next.

The reopening of subscriptions is also not necessarily permanent. Baroda BNP Paribas Aqua FoF, for instance, has stopped accepting fresh investments on previous occasions before reopening them.

Should investors rush to invest in the only open international SIP?

The limited availability of international mutual funds does not automatically make the remaining schemes attractive investments.

Baroda BNP Paribas Aqua FoF invests in overseas companies linked to the water sector. While it provides international exposure, it is a thematic fund and does not offer the same diversification as a broad-based global equity fund.

Similarly, PGIM India’s Global Select Real Estate Securities FoF focuses on overseas real estate securities. Investors should understand the underlying portfolio and sector-specific risks before investing.

Value Research data show that Baroda BNP Paribas Aqua FoF delivered returns of 18.7% over one year, 17.4% annualised over three years and 9.1% annualised over five years as of November 4. PGIM India’s Global Select Real Estate Securities FoF returned 16% over one year and 15.8% annualised over three years.

However, past performance and the availability of fresh subscriptions should not be the primary reasons for choosing a fund. Investors should assess their existing domestic equity allocation, investment horizon, risk appetite and the role international exposure will play in their portfolios.