Mirae Asset Mutual Fund tells investors to be careful of buying overseas ETFs on exchange

livemint.com:

Mirae Asset Mutual Fund has cautioned retail investors against investing in overseas exchange traded funds (ETFs) through the stock market.

In a notice released on Monday, the fund house told investors that in order to comply with Sebi restrictions on the limit on fresh inflows in overseas ETFs, fund house had temporarily suspended subscriptions received directly from an investor in Mirae Asset’s overseas schemes which are Mirae Asset NYSE FANG+ ETF, Mirae Asset S&P 500 Top 50 ETF and Mirae Asset Hang Seng Tech ETF.

It is worth noting that the mutual fund houses are not meant to accept fresh money for ETFs listed on foreign exchanges from April 1 onwards, as per the Sebi’s order issued in March.

The fund house later explained that in order to comply with the regulatory limit, the creation of units of overseas ETFs by market makers is limited.

As a result of this, there may be a possible impact on the liquidity and trading price of these ETFs on the exchanges where they are still bought and sold.

This is because the trading price of the overseas ETFs on the exchange may be different from its indicative intraday value (I-NAV). And as a result, ETFs may trade at either premium or discount.

So, the fund house has advised investors to take precaution while buying the ETFs on the exchange and to put 'limit order' while buying and selling the overseas ETF safter looking to the I-NAV published on the website at this link: https://www.miraeassetmf.co.in/transact-in-etf

Further, the fund house told investors that the limit on overseas investments affects the creation of units of overseas ETFs, but not the redemption of units.

The fund house tried to allay the fears by making it clear that the market makers will continue to provide