Axis Mutual Fund Pauses 3 International Schemes: What Investors Need to Know

Investment management firm, Axis Mutual Fund has temporarily suspended subscriptions in three of its schemes from May 13. The schemes in which subscription has been suspended include Axis Global Equity Alpha Fund of Fund, Axis Global Innovation Fund of Fund and Axis Greater China Equity Fund of Fund.

The fund house notified the suspension of fresh subscriptions across three of its major overseas schemes in an official notice released by Axis Mutual Fund on May 13. The fund house stopped accepting all fresh capital, including lumpsum investments, switch-ins, systematic transactions and fresh registrations of systematic transactions from May 13. Earlier on May 5, the fund house had initially attempted to manage capacity by placing a Rs 1 lakh monthly cap per PAN.

Why Did Axis Mutual Fund Suspend Subscriptions 

According to a report by Arihant Capital subscriptions were suspended in Axis Global Equity Alpha Fund of Fund, Axis Global Innovation Fund of Fund, and Axis Greater China Equity Fund of Fund due to a regulatory ceiling. The mutual fund industry operates under a $7 billion limit for overseas investments set by the Reserve Bank of India (RBI) and Securities Exchange Board of India.

As these three specific schemes invest in overseas actively managed funds and equities, they are at the investment capacity limit set under these regulations. As of April 30, Axis Global Equity Alpha Fund of Fund’s assets under management (AuM) stood at Rs 2,290 crore, Axis Global Innovation Fund of Fund’s AuM stood at Rs 831 crore and Axis Greater China Equity Fund of Fund had an AuM of Rs 3,858 crore.

The valuation of the securities held by the schemes surged as global markets rallied in the past year, leaving no room to deploy fresh capital from new investors without breaching the investment cap set by the market regulator.

What Happens To Existing Investors In The Suspended Schemes

Investors who are investing in the schemes via the Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) registered before the cutoff date have been placed in a "paused" state and money will not be deducted from their accounts for these schemes for the time being. However, investors must note their mandates remain active in the fund house’s system. 

Liquidity and Redemptions for Current Unit-Holders

The suspension applies only to the entry of new money, the liquidity of existing investments remains entirely unaffected. Investors who have units of Axis Global Equity Alpha, Global Innovation, or Greater China funds have the option of redeeming their holdings or switching out of these schemes into domestic Axis mutual funds.

Status of Passive and ETF-Based Offerings

Despite the suspension, Axis Mutual Fund has highlighted that certain passive international offerings remain open for subscription, these include the Axis NASDAQ 100 US Specific Equity Passive FoF, the Axis S&P 500 ETF FoF, and the Axis US Specific Treasury Dynamic Debt Passive FoF. These three funds provide an avenue for investors seeking to diversify their portfolios into US-specific equity and debt markets.