Why Mirae Asset Mutual Fund Temporarily Halted Acceptance of Overseas Funds?

Mirae Asset Mutual Fund, a prominent player in the investment landscape, has recently made headlines by temporarily suspending multiple investment avenues in its overseas schemes. The decision impacts various options such as lumpsum subscriptions, fresh systematic investment plans (SIP), and systematic transfer plans (STP) within funds like Mirae Asset NYSE FANG+ ETF Fund of Fund, Mirae Asset S&P 500 Top 50 ETF Fund of Fund, and Mirae Asset Hang Seng TECH ETF Fund of Fund.

This unexpected move, effective after the closure of business hours on January 5, has stirred curiosity among investors and market analysts. The primary motive behind this decision is to prevent any breach of the prescribed investment limits by February 1, 2022. Mirae Asset Mutual Fund took this proactive step to align its investments within the stipulated regulatory boundaries.

Investors were promptly informed about this strategic move through an addendum cum notice, outlining the temporary suspension and its scope on various investment options within the mentioned overseas schemes.

The fund house has clarified that it will not be accepting applications for creating units of Exchange Traded Funds (ETFs) for the specified schemes, including those from large investors, post the January 5 deadline. However, pre-existing SIP/STP subscriptions will persist until further notice, while new registrations for SIP/STP within these schemes will be temporarily barred. Furthermore, intra and inter scheme switch-ins are also prohibited during this suspension period.

It’s important to note that this suspension is not a permanent measure but a strategic pause that will undergo periodic reviews. Mirae Asset Mutual Fund has highlighted that this action may be revised based on several factors, such as redemption patterns within these schemes or potential enhancements in investment limits by regulatory bodies like SEBI/RBI.

However, it’s reassuring for existing investors that this suspension does not affect processes related to redemption, switch-out applications, or systematic withdrawal plans (SWPs) within the specified schemes.

Interestingly, despite the suspension, ETF units will continue to trade on the stock exchanges such as NSE and BSE, allowing investors to trade (buy/sell) these units freely.

This decision by Mirae Asset Mutual Fund comes in the wake of an earlier suspension of certain investment avenues starting February 2, 2022, due to regulatory communication from SEBI. Subsequently, in June 2022, SEBI provided directives allowing mutual funds to resume subscriptions within the overseas investment limits as of February 1, 2022, at the mutual fund level.

It’s worth noting that this step isn’t isolated, as several mutual funds had previously ceased accepting funds in overseas investments after surpassing the $7 billion overall limit set by regulators.

In conclusion, Mirae Asset Mutual Fund’s decision to temporarily suspend various investment avenues within its overseas schemes is a proactive move aimed at aligning with regulatory investment limits. This strategic pause underscores the fund’s commitment to managing its investments prudently while staying within the prescribed boundaries, and it remains subject to periodic reviews based on market dynamics and regulatory guidelines.